Bonds, T-bills close positive, naira calm on street as investors await rates drop
T-bills to remain quiet, OMO to stay bearish as participants put liquidity needs top priority
THE FIXED INCOME MAR KET WAS largely positive last week, especially in the bonds and Nigerian Treasury Bills spaces as players acted bullish across tenors in both spaces in anticipation of a drop in rates.
Meanwhile, the OMO market was a contrast as participants prioritized liquidity needs and sold off tenors across space as the local currency traded mildly across bands. However, as market participants settle in for the month, experts envisage the market to resume on a similar mixed note, with the majority of trades to be conducted in the bonds space, given the tightened level of system liquidity; with quiet trading in the NTB market, while OMO activity remains bearish. Furthermore, the local currency is also expected to remain largely stable across the various windows of the currency space as the CBN maintains interventions in the FX market.
In the money market, at the close of last week, the Overnight (O/N) rate increased by 0.50 per cent to close at 12.50 per cent as against the last close of 12 per cent, and the Open Buy Back (OBB) rate also increased by 0.50 per cent to close at 12 per cent compared to 11.50 per cent on the previous day.
In the currency market, it was not all rosy as the Naira depreciated N0.25, week on week at the I&E FX Window, to close at N411.25 to a dollar while, it closed flat, week on week, at N498 to the greenback at the parallel market. Most market participants maintained bids at between N400 and N420.95 per dollar.
Treasury Bills market
The Nigerian Treasury Bills secondary market closed the week on a flat note, with the average yield across the curve remaining unchanged at 6.58 per cent by the end of the week and leaving the average yields across short-term, medium-term, and long-term maturities to close flat at 4.35 per cent, 5.46 per cent, and 8.09 per cent, respectively. The flat close was, however, buoyed by the auction held during the week where the Debt Management Office offered N2.88 billion, N20.00 billion, and N58.86 billion worth of maturities, and sold N2.3 billion, N3.3 billion, and N158.0 billion across the 91-day, 182-day and 364-day tenors, respectively at stop rates of 2.5 per cent, 2.5 per cent and 9.15 per cent, effectively easing 25 basis points on the longest tenor. Elsewhere in the OMO bills market, the average yield across the curve increased by 6 basis points to close at 9.92 per cent as against the last close of 9.86 per cent. Selling pressure was seen across short-term, medium-term, and long-term maturities with the average yields rising by 1 basis point, 10 basis points, and 6 basis points, respectively. Yields on 15 bills advanced with the 11-Jan-22 maturity bill recording the highest yield increase of 19 basis points, while yields on 9 bills remained unchanged.
The federal government bonds secondary market closed the week on a positive note, as the average bond yield across the curve cleared lower by 14 basis points to close at 9.62 per cent from 9.76 per cent on the previous day. Average yields across the short tenor, medium tenor, and long tenor of the curve declined by 15 basis points, 21 basis points, and 1 basis point, respectively. The 22-JAN-2026 maturity bond was the best performer with a decline in yield of 80 basis points, while the 27-MAR2050 maturity bond was the worst performer with an increase in yield of 4 basis points.