On Tuesday, several local investors kept selling their portfolios of FGN bonds in the secondary market despite the continuous negative interest yield on naira assets in the fixed income securities market.
The money was then welcomed by the stock market, increasing the year-to-date return to roughly 28%. Comparing the actual return on government instruments to the market as a whole, the return on equity is already more than the annual inflation rate of 24.08%.
CardinalStone informed clients via email late on Tuesday that gloomy views are still pervasive in the bond market and that investor sell-offs are biased towards the mid (+2bps) and long (+18bps) regions of the curve. Some experts and dealers said that the selloffs occurred as a result of a lackluster demand for FGN bonds at the debt agency’s just finished monthly auction.
Pension Fund Administrators, regional deposit money banks, and other authorized dealers continue to express a desire for yield repricing, although spot rates have moved in an uninteresting manner throughout the main market auctions held by the monetary authority and debt management office. They have also been unstable.
According to an update from Cordros Capital, as market participants sold off the bonds dated MAR-2024 (+8bps), JUN-2033 (+31bps), and MAR-2036 (+74bps), respectively, the average yield increased throughout the benchmark curve in the short (+1bp), mid (+5bps), and long (+18bps) segments.
Notably, the yield on the 10-year bond was about 14.22%, up 4 basis points from the previous closing. Additionally, the rates on the 20-year and 30-year FGN bonds remained stable at 15.19% and 15.30%, respectively. The average bond yields climbed yesterday at the closing of business.
In the money market, liquidity level declined strongly following auction debits, thus pushing short-term benchmark rates higher, causing funding pressures for Nigerian deposit money banks striving to meet their daily liquidity requirements. Consequently, the overnight lending and repo rates advanced by 1.30ppts and 1.45ppts to close at 23.80% and 24.75% apiece.
The Nigerian Treasury bills secondary market traded with bullish sentiments, as the average yield contracted by 11 basis points to 8.3%.
Across the curve, Cordros Capital told investors that the average yield declined at the short (-73bps) end as participants demanded the 65-day to maturity (-293bps) bill but expanded at the long (+6bps) end due to the selloff of the 338-day to maturity (+79bps) bill.
Conversely, the average yield was flat at the mid-segment. Elsewhere, the average yield was unchanged at 11.2% in the OMO bills segment.
