Sell Pressure Hits Nigerian Eurobond Amid Russia’s Invasion
The average yield on Federal Government of Nigeria (FGN) Eurobonds rise 18 basis points on Monday following Russia’s invasion in Ukraine that distorted the global financial markets.
In the local market, trading activities in fixed income instruments continue to adjust as investors’ demand for Nigerian Treasury bills inched up. Today, there was a cautious trading pattern as the market awaits fresh catalysts that could drive yield repricing.
Recall that the Central Bank of Nigeria (CBN) primary market auction witnessed hefty demand that triggered spot price down last week. High subscription levels seen in the past auctions have been driven by healthy liquidity in the financial system.
In the money market today, the average interbank rate dropped by 288 basis points to close at 12.00% – both Open Buy Back rate and overnight rate were down.
Data from FMDQ Exchange shows that the overnight lending rate decreased by 267 basis points to close at 12.33 per cent as against the last close of 15.00 per cent.
In the same direction, the Open Repo rate decreased by 3.08 per cent to close at 11.67 per cent compared to 14.75 per cent on the previous day. Following bullish trading records, activities at the Nigerian Treasury Bills secondary market ended on a calm note as investors’ moods swing.
In a market note, Alpha Morgan Capital said some interests were seen on the July 2022, Feb 2023, & Jan 2023 papers as well as the May CBN special bills. Consequently, the average rate remained flat to close at 3.59%.
Average yields across short-term, medium-term, and long-term maturities remained unchanged at 3.03 per cent, 3.42 per cent, and 4.20 per cent, respectively, according to FSDH Capital.
Meanwhile, the yield curve was dragged lower as activities at the FGN bond secondary market was bullish today. Traders at Alpha Morgan Capital hinted that the 2042s paper witnessed the most demand.
Also, buying interest was recorded in FGN 2025s, 2027s, 2028s, 2029s, 2034s, 2045s, and 2049s. As a result, the average yield dropped by 5bps to close at 10.92%.
In the OMO bills market, the average yield across the curve closed flat at 3.92 per cent after the CBN auction ended with flattish spot rates across tenored last week. Also, the average yield across the long-term maturities remained unchanged at 3.92 per cent.
Amidst buckets of sanction by the United States, and the European Union, activities at the FGN Eurobond market held on to the bearish trend today, traders said in a note.
There were sell-side pressures across the yield curve as investors are still dumping their instruments in reaction to the tensions between Russia & Ukraine, according to a note from Alpha Morgan Capital. In sum, the average yield was up by 18 basis points to close at 7.65%. #Sell Pressure Hits Nigerian Eurobond Amid Russia’s Invasion
Read: FGN Eurobond Yield Adjust as Demand Spikes
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