Nigeria’s Bond Rate Slides as Financial System Liquidity Pressure Eased


Bond rate slides 5 basis points Monday as investors’ sentiments in the Nigerian debt market were mostly bearish. It also appears that upward yield repricing has slowed down as the monetary policy committee decided to hold key rates caused setbacks for investors’ quest for high returns on fixed income securities.

This week, analysts said there will be a total sum of N55.5 billion that will hit the financial system from maturing open market operations (OMO). In the past week, there have been liquidity squeeze in the financial system, which pushed money market rates upward.

Noting a quiet outing, fixed income traders at Chapel Hill Denham said they expect this inflow to trigger activities at the short-end of the yield curve as investors would be looking to re-invest the liquidity in the market.

Financial market data shows that liquidity in the money market improved on Monday as demand pressures from market participants declined. Consequently, the open buyback and the overnight rates declined by -6.17% points to close the day at 12.50% and 13.00% respectively.

Bond Rate Slides as Financial System Liquidity Pressure Eased
Patience Oniha, Director-General, Debt Management Office
This come after a 7-fold increase in borrowings from the Central Bank standing lending facility between January and May, 2021, according to CardinalStone Partners.

Meanwhile, the fixed income market mostly traded flat on Monday, particularly in the Nigerian Treasury Bills (NTB) and open market operations (OMO) space.

Analysts said the NTB benchmark curve was flat, closing at 5.78% while the OMO benchmark curve expanded by 10bps to close at 8.98%, reacting to selling activities on the Aug-2021 maturity.

In the bond market, sentiments were mostly bearish resulting in the bond benchmark curve contracting by 5 basis point to close at 13.28%.

Last week, yields expanded on the benchmark curve by an average of 7 basis points week on week to 13.34%, while the NTB and OMO curves also expanded by 38bps and 25bps to 5.78% and 8.88% respectively.

Going into the week, Afrinvest said it expects sustained bearish trend in the secondary market particularly in the mid- to long-end of the curve and advice investors to position in attractive yields in the market particularly at the short end of the curve.