Bond Yield Tracks Higher as Naira Appreciates to N416

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The average yield on the Federal Government of Nigeria (FGN) bond tracks higher in the secondary market, up 2 basis points to 11.89 per cent midweek as naira appreciates against the United States at Investors and Exporters foreign exchange window.

Naira holds strong against the greenback for the second trading session in the New Year following apex bank year-end devaluation of the local currency – the weakening was subtle and loud given the size.

It would be recalled  that toward the year-end, the Central Bank had devalued the local currency by about 5% at the investors and exporters foreign exchange window, from N415 to N435. Read: Interbank Rates Slow Down as Naira Appreciates

Data from the FMDQ Exchange platform however shows that Naira appreciated by 1.58 per cent as the dollar was quoted at ₦416.00 as against the last close of ₦422.6 at the Investors and Exporters FX window on Wednesday.

Analysts also informed that most participants maintained bids between ₦405.00 and ₦443.50 per dollar.

In the money market, short term interest rates decline further in the absence of significant liquidity strain in the financial system – now to a lower single digit. The average interbank rate dropped by 221 basis points to close at 4.88%.

The slowdown in the average interbank rate occurred following a contraction in open buyback and overnight rates. Market data from FMDQ Exchange shows that the overnight lending rate declined 225 basis points to close at 5.25 per cent as against the last close of 7.50 per cent.

The Open Repo rate decreased by 217 basis points to close at 4.50 per cent compared to 6.67 per cent on the previous day.  Money market rates are likely to remain subdued, barring any mop-up activity by the Central Bank, according to FSDH Capital.

In the Nigerian T-Bills secondary market, trading activities close on a flat note with the average yield across the curve remaining unchanged at 4.50 per cent.

Today, analysts also spotted that average yields across short-term, medium-term, and long-term maturities remained unchanged at 3.57 per cent, 4.12 per cent, and 5.29 per cent, respectively.

In the OMO bills market, the average yield across the curve closed flat at 5.50 per cent. FSDH said in a note that average yields across short-term and long-term maturities remained unchanged at 5.49 per cent and 5.52 per cent, respectively.

FGN bonds secondary market closed on a mildly negative with bullish tilt as the average bond yield across the curve cleared higher by 2 basis points to close at 11.89 per cent from 11.87 per cent on the previous day.