Yield on bond rises as Naira depreciates at investors window

AVERAGE yield on Bonds rises to 8.7% on Tuesday as the Nigerian local currency, Naira, depreciates at investors and exporters window to ₦401 to United States dollar.

Naira depreciates at Investors and Exporters Window on account of limited supply at the time when demand for greenback continues to rise.

Unfortunately, despite lower external reserve buffer, foreign investors shy away from the Nigerian economy due to the Central Bank of Nigeria’s capital control.

Today, the Nigerian Treasury bills (T-Bills) market traded flat for a second straight day with yields remaining at an average of 1.0%.

However, the Central Bank of Nigeria is expected to hold its weekly Primary Market Auction (PMA) on Wednesday.

At the Auction, the apex bank planned sales of ₦19.8 billion, ₦10.0 billion, and ₦140.0 billion across the 91- day, 182-day, and 364-day instruments, respectively.

“We expect investors to continue to widen the bid range in search of higher stop rates at the PMA”, Greenwich Merchant Bank said in a note.

Elsewhere, system liquidity firmed up 51.6% to ₦282.2 billion supported by open market operations (OMO) repayment of ₦200.8 billion.

Accordingly, Greenwich stated that the Open Buy Back and Over Night rates eased to 8.5% and 8.8% apiece from 14.0% and 14.3%.

It added that bearish sentiment pervaded the OMO market, although momentum waned, as yields continue northward.

After trades, market data showed the average yield rose 94 basis points to 6.4%.

Greenwich however noted that compare with what happened in the previous day, the largest selloffs were recorded on short-dated bills.

Meanwhile, selloffs persisted in the Bond market on Tuesday, stoking a 21 basis points rise in yields across the tickers to average 8.7%.

Investors sold off instruments at the belly of the curve by the most (+39bps) relative to the short (+17bps) and long (+6bps) segments.

The highest yield increase was recorded on the 23-Feb-28 instrument (+164bps), as analysts expect market pessimism to linger in tomorrow’s session.

Elsewhere, the Naira held steady at ₦480.00 to the greenback at the parallel foreign exchange market.

Meanwhile, the Investors and exporters (IEW) rate weakened to a year low of ₦401.00/USD, from ₦398.50/USD, ₦2.50/USD weaker.

“We recall that rates at this window hit ₦410.25/USD on December 31, 2020”, Greenwich said.

Yield on Bond Rises as Naira Depreciates at Investors Window