Tuesday, January 23, 2018 7:10:28 AM- Nigerian Stock Exchange.

  Cut in MPR rate drives bond yields to multi-year lows


Dec 10 (Lagos) - The naira curve contracted ~520bps MoM on average to 5.7% in November—the lowest level in 4 years—as investors ramped up purchases across maturities in response to monetary influences, thus shrugging off news of a potential ramp up in borrowing to plug fiscal deficit. 

Prior to the announcement of the supplementary budget, the yield curve had contracted over 300 bps on still elevated market liquidity of ~N700 billion (+8% MoM as at November 17th) with the spike that trailed the budget news short-lived. 

Thereafter, further down draft in yields was driven by CBN’s new expansionary monetary policy thrust. Specifically, the apex bank slashed MPR and CRR by 200bps and 500bps to 11% and 20% respectively, stoking a continuation of yields decline in November. Overall, T-bill yields fell on average 653bps MoM to 1.35%, 2.87%, and 3.73% for the 91day, 182day, and 365day papers, while mean bond yields fell 381bps MoM to 7.52%, 9.93%, and 8.98% for the FGN 2017, 2019, and 2022. 

Going forward, analysts at Asset & Resource Management Ltd in Ikoyi expect CBN’s accommodative monetary policy stance to subsist, even as expanding system liquidity (+41% MTD to N900 billion) sustains the current declining yields trajectory. 

reporting for easykobo.com on Thursday, Dec 10 2015 from Lagos, Nigeria

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