Yields lower slightly in Nigerian bond market

The double Open Market Operation (OMO) T-bill rate hikes by the Central Bank of Nigeria (CBN) and slight offshore sell towards month end caused yields to slightly lower by 3 basis points on Thursday, but closed the month 31 basis points higher Month-on-month.

The bond market traded on a relatively mixed note, with slight demand on the short end of the curve offset by selloffs on the mid to long end, notably on the 2028s and 2034s, which were sold off to 15.68 per cent and 15.48 per cent respectively, Zedcrest Capital noted in its report.

Yields inched slightly higher by 6 basis points in Wednesday’s session, following a weaker than expected NTB auction result, which prompted slight selloff on some mid and long tenured maturities.

Despite the significant boost in system liquidity from FAAC payments in the previous session, trading activities remained very low as market players anticipated a further OMO auction by the CBN to mop up N382bn in OMO maturities tomorrow.

“We expect the market to tilt slightly bearish tomorrow, with the lift in the PMA rates on the 182-day (+95bps) and 364-day bills (+80bps), fueling speculations for a further hike in OMO rates by the CBN,” Analysts at Zedcrest said.

The analysts believe in the coming month, the market would remain slightly bearish, with the DMO confirming the weak fiscal position of the FG via higher stop rates in recent auctions (Bonds/T-bills), and the CBN also expected to sustain higher rates in the T-bills market, in a bid to checkmate excessive FPI outflows.

Ayodeji Ebo, Managing Director, Afrinvest Securities explained on Twitter that CBN’s OMO rates may touch 15 per cent levels for the 364-day bill tomorrow as N381.9bn OMO matures and added that long term bills in the secondary market to also adjust accordingly.