The yields on Kenyan Treasury bills are expected to remain stable, while those on Nigerian Treasury bonds could mark time ahead of the outcome of the central bank’s monetary policy meeting.
Nigeria’s debt market is expected to take its next direction from the outcome of the Central Bank of Nigeria’s (CBN) rate-setting Monetary Committee meeting scheduled for early next week.
Traders said they were cautious since the committee could take measures to support the flagging local currency, including a possible hike in cash reserves requirements.
The committee will meet for two days from November 24, against the backdrop of a steep drop in the price of crude oil that has put significant pressure on the naira currency.
Yields on Nigerian government bonds rose around 50 basis points across all maturities week-on-week, but some local pension funds were seen taking positions in the market on Friday after yields fell from around 14 percent mid-week.
“We are expected to trade cautiously, waiting to see the outcome of the rate setting meeting of the MPC next week,” one dealer said.
The benchmark 10-year bond rose 52 basis points to 13.70 percent on Friday from 13.18 percent last week, the 2022 was trading around 13.56 percent against 13.23 percent, while 2016 paper was at 13.68 percent versus 13 percent a week earlier.
The naira has lost 11.42 percent year-to-date on concerns over falling oil prices and exiting of the local debt by offshore investors.
Kenyan Treasury bills’ yields are expected to hold steady or move by very small margins, with a weakening shilling expected to limit their movements.
The Central Bank will auction 91-day, 182-day and 364-day bills worth a total 12 billion shillings.
At this week’s sale, the weighted average yield on the 91-day bill fell to 8.597 percent from 8.609 percent last week, while that on the 182-day bill fell to 9.201 percent from 9.211 percent. The yield on the one year bill rose slightly to 10.244 percent from 10.212 percent.
“On the yields, I don’t expect much change. We should continue to bid more flat,” said Faith Atiti, research analyst at Commercial Bank of Africa.
“As much as rates are coming off on the long end, I think the short end is limited by the current pressure on the shilling, in that if rates fall further, people prefer to hold dollars.”
The shilling has been hovering near three-year lows since last week, prompting the central bank to enter the market at least twice this week.
Source : BusinessDay