Fixed Income Market Trades Hit N41trn As OMO, Bonds Attract Investors

Trading in Nigeria’s fixed income market rose significantly in September, reaching N41.07 trillion as investors increased their exposure to Open Market Operation (OMO) bills and Federal Government bonds despite a decline in yields.

Data from the Fixed Income Dashboard showed that the total value of fixed income securities traded during the month increased by N4.45 trillion, or 12.1 per cent, from N36.62 trillion recorded in August.

The increase reflected stronger investor activity across major market segments, with OMO bills and Federal Government bonds accounting for the bulk of transactions during the period.

OMO bills remained the most actively traded instrument, with transaction value rising to N28.05 trillion in September from N26.30 trillion in August. The N1.75 trillion increase represented a 6.7 per cent month-on-month growth.

The surge in OMO activity came after the Central Bank of Nigeria (CBN) reversed its restriction on local investors’ participation in OMO auctions, opening the market to individuals, corporates, and non-bank financial institutions.

Federal Government bonds recorded the strongest growth in absolute terms, with their traded value rising from N4.59 trillion in August to N6.96 trillion in September.

The N2.37 trillion increase represented a 51.6 per cent month-on-month growth, highlighting stronger investor interest in government debt instruments during the period.

Treasury bills also recorded an increase in trading value, rising from N5.69 trillion in August to N5.99 trillion in September. This represented an additional N298.1 billion, or 5.2 per cent, during the month.

Similarly, Sukuk transactions increased from N40.11 billion in August to N66.79 billion in September, representing a N26.68 billion, or 66.5 per cent, increase.

Despite the sharp percentage growth in Sukuk trading, the instrument remained the smallest segment of the fixed income market by value.

The increase in the value of securities traded was accompanied by a substantial rise in the number of transactions, which climbed to 11,652 in September from 9,192 in August.

This represented an increase of 2,460 transactions, or 26.8 per cent, indicating broader market participation during the month.

OMO bills accounted for 5,485 trades in September, compared with 4,037 in August, while Federal Government bonds recorded 3,889 trades, up from 2,471 in the previous month.

Treasury bills, however, recorded 2,227 trades in September, down from 2,666 in August, despite an increase in their total trading value.

Sukuk transactions also increased sharply, rising to 51 in September from just 18 in August.

The stronger activity in the fixed income market occurred despite a decline in yields across several maturities during September, as investors adjusted their positions to changing monetary policy and liquidity conditions.

The Fixed Income Dashboard showed that the closing yield on benchmark OMO instruments fell to 20.04 per cent at the end of September from 22.67 per cent at the beginning of the period, while the weighted average yield stood at 20.15 per cent.

Yields on Federal Government bonds also moderated across several tenors, with the closing yield on the 27-year instrument declining to 14.70 per cent by the end of September.

The combination of higher transaction values and lower yields suggests that investor activity remained strong even as returns on some fixed income instruments moderated, with OMO bills and government bonds continuing to dominate market activity.