Bond rates inched up moderately to 13.05% on Thursday after adding 5 basis points amidst selling pressure in the fixed income market trades following investors demand for higher yields on securities.
With inflation rate print at 18.17%, fixed income market investors are nursing higher yields expectation as current return on investment remain negative while analysts forecast inflation rate uptrend for May.
In the money market however, funding pressures remained elevated amid constrained liquidity in the financial system, which has kept many banks in the Standing Lending Facility window.
According to analysts at Chapel Hill Denham, the financial system liquidity opened in a deficit of N167.9 billion, albeit an improvement from a deficit of N407.5 billion recorded on Wednesday.
Consequently, the open buy back rate closed flat at 15.00%, while the overnight rate increased by 25 basis points (bps) to 15.75%.
In a report, analysts at Chapel Hill Denham said interbank funding pressures will likely remain in the trading session ahead.
Meanwhile, the fixed income market traded cold and quiet as activites closed largely flattish on Thursday.
At the front end of the curve, the Nigerian treasury bills and open market operations benchmark curves closed flat at an average of 4.19% and 7.70% respectively, analysts said.
Yields expanded on the benchmark curve by an average of 5 basis points to 13.05%, mainly due to selling pressures at the belly of the curve, up 13 basis points to 13.32%.
In a related development, the Nigerian local currency, naira, continued to trade within a tight band at all segments of the foreign exchange market.
In the Investors and Exporters Window, the local currency weakened against the United States dollar (USD) by 0.12% or 50 Kobo to close at N411.00.
However, exchange rate remained unchanged in the Official and Secondary Market Intervention Sale (SMIS) segments at N379.00 and N380.69 respectively.
Funding Pressure from Squeezed Liquidity Drives Banks to CBN
Similarly, the pair traded flat at N485.00 in the parallel market as the nation’s external reserves extended decline, closing lower at US$34.76 billion.
Bond Rates Inched up moderately to 13.05% over Selling Pressure