Despite declining local currency, there was persistent purchasing activity in Naira-denominated securities, which caused the average yield on Nigerian Treasury notes to decline by 10 basis points to close at 12.57%.
Despite the fact that inflation has reduced actual return on investment, investors in fixed interest instruments have remained optimistic about the Treasury curve this week. One of the factors that has kept international investors out of Nigeria’s fixed income market over the years is the negative interest rate on government borrowing instruments.
This has decreased the amount of foreign money that has starved Nigeria of foreign currency, even as it has helped lower the country’s borrowing rates from the local market.
A new market dynamic that surfaced has however forced the Central Bank of Nigeria (CBN) to reprice rates on Treasury bills. In its latest auction, short and mid-tenor Treasury bills were priced higher by 100 basis points.
However, the apex bank kept a lid on 364-day which remained unchanged. In the secondary market for Nigerian Treasury Bills, positive interest at the longer end of the yield curve led to a 10bps decline in the average secondary market yield, closing at 12.57%.
In the money market, short-term benchmark interest rates remained at double-digit highs after the CBN removed the limit on the amount that local banks can put in their standing deposit facility.
Data from FMDQ showed that the open repo rate (OPR) and overnight lending rate (OVN), moved higher, reaching 25.67% and 26.67%, respectively on Thursday. Reps To Investigate N200bn Expenditure On Postponed 2023 Census
Analysts are expecting further yield repricing in the fixed income market as inflation, and weak local currency exert pressures on portfolio returns.
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