As short-term benchmark interest rates in the money market jumped yesterday due to liquidity constraints, the average yield on Nigerian Treasury notes and Open Market Open (OMO) bills decreased somewhat in the secondary market.
Investors in fixed income continue to fluctuate in tandem with shifting market conditions. The persistent depreciation of the Naira and Nigeria’s soaring inflation rate have not been stopped by double-digit high interest rates.
Yesterday’s bond auction sales were unsuccessful because local investors avoided purchasing naira assets with negative interest rates. According to a remark by CardinalStone Partners, Nigeria has a strong double-digit interest rate environment given the country’s current 27-year high inflation trajectory and the need to improve carry-trade to encourage foreign investors to return.
In the secondary market, investors parked funds into Treasury bills. As a result of demand, the average yield declined by a basis point to 15.44%. In its market update, Cordros Capital Limited said across the curve, the average yield closed flat at the short end but pared at the mid (-1bp) and long (-1bp) segments.
This was due to demand for the 170 day to maturity (-1bp) and 352 day to maturity (-1bp) bills, respectively. Similarly, the average yield contracted by 1bp to 17.8% in the OMO bills segment in the secondary market.
In the money market, short-term benchmark interest rates surged strongly due to tight liquidity. The overnight lending rate expanded by 644 basis points to close the day at 23.9% on account of a dearth of significant inflows from maturing instruments to saturate funding levels. In the same vein, the open repo rate jumped to 23.01% from 16.71%, data from the FMDQ platform showed.
