The Nigerian local debt market was upbeat following a hike in benchmark interest rates by the Central Bank’s monetary committee in an effort to combat inflation. The debt management agency has indicated a goal to raise N1.2 trillion from the market in the first quarter of 2023.
Though buying interest in the fixed income market remains robust, a high inflation rate has lowered real return on investment at the same time that investors’ portfolio size has been severely impacted in dollar terms.
The trading pattern in the fixed income market has improved as a result of the financial system’s solid liquidity. This resulted in greater subscription numbers in the CBN’s primary market auctions in 2023, forcing spot rates across 90-day, 181-day and 364-day bills downward.
The average yield on Nigerian Treasury notes fell by 7 basis points to 3.4% after the closing of secondary market trade.
According to Cordros Capital analysts in a market brief, the average yield fell at the short end (-15bps) as players demanded the 30-day to maturity (-107bps) bill.
Meanwhile, the yield curve flattened out in the mid and long sectors. Meanwhile, the average yield on open market operations (OMO bills) was steady at 2.9%.
In the bond market, the price of FGN bonds rises as investors become positive on longer-dated securities, despite the fact that the average yield fell by 5 basis points to 13.35%. Following investors’ sell-off, the average yield throughout the benchmark curve fell at the short end (-15bps).
In contrast, the average yield in the mid and long portions remained unchanged. The yield on 30-year debt, in particular, fell by 46 basis points (0.46%) to 14.96%. On the other hand, the 20-year paper was 38 basis points lower, at 15.35%. Meanwhile, 10-year and 15-year bond rates were stable at 14.58% and 15.29%, respectively.
According to Cowry Assets, the value of the FGN Eurobond dropped for the majority of the maturities tracked due to continued negative behavior. According to analysts, the average secondary market yield has risen to 10.73%.
Following the inflow of N21.44 billion in FGN bond coupon payments, the overnight lending rate fell by 100 basis points to 10.2% in the money market.
