{"id":156011,"date":"2025-11-27T08:14:08","date_gmt":"2025-11-27T08:14:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/156011\/"},"modified":"2025-11-27T08:14:08","modified_gmt":"2025-11-27T08:14:08","slug":"yields-fall-across-board-as-investors-react-to-cbns-corridor-shift","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/156011\/","title":{"rendered":"Yields fall across board as investors react to CBN\u2019s Corridor shift"},"content":{"rendered":"

Nigeria\u2019s financial markets have responded decisively to the Central Bank of Nigeria\u2019s (CBN) recent adjustment of the monetary policy corridor, with yields falling across both money and bond markets.<\/p>\n

While the Monetary Policy Committee (MPC) left the Monetary Policy Rate (MPR) unchanged at 27%, it delivered a surprise tweak to the asymmetric corridor\u2014reducing it to +50\/-450 basis points from +250\/-250bps.<\/p>\n

Market analysts believe the move signals a subtle pivot toward easing and igniting a wave of repricing across fixed income instruments.<\/p>\n

It also effectively lowered the rate at which banks can deposit funds with the CBN, the Standing Deposit Facility (SDF), to 22.5% from 24.5%, and the Standing Lending Facility (SLF) to 27.5% from 29.5%.<\/p>\n

Analysts say this adjustment marks a critical shift in monetary posture, prompting recalibration in the yield curve as investors price in expectations of improved liquidity and a more accommodative policy path.<\/p>\n

Liquidity surge drives money market rates down<\/p>\n

In the immediate aftermath of the policy announcement, interbank lending rates experienced sharp declines, reflecting enhanced system liquidity and a retreat in risk-free return expectations, according to Cowry Asset Daily Market Insight for November 26, 2025.<\/p>\n

The Overnight (O\/N) rate fell by 198 basis points to 22.69%, while the Open Repo (OPR) rate remained stable at 22.50%.Short- to medium-term interbank tenors also posted notable drops. The 1-month, 3-month, and 6-month rates fell by 169bps, 157bps, and 187bps respectively.<\/p>\n

Market dealers attribute the declines not only to the corridor shift but also to the impact of a N360 billion OMO maturity which added to available system liquidity.<\/p>\n

Treasury Bill and Bond Yields Compress Further<\/p>\n

The secondary market for Nigerian Treasury Bills (NT-Bills) also responded, albeit with more modest shifts.<\/p>\n

Yields on short-term instruments compressed further, with 1-month, 3-month, 6-month, and 12-month NT-Bills declining by 2bps, 10bps, 11bps, and 1bp respectively.<\/p>\n

Despite these movements, the average NT-Bills yield remained flat at 16.85%, suggesting that the market remains cautious amid ongoing macroeconomic uncertainties.<\/p>\n

The government bond market echoed the same sentiment, with average yields across Federal Government of Nigeria (FGN) bonds dipping by 1bp to 15.47%.<\/p>\n

This was supported by a combination of strong investor demand, improved liquidity, and expectations that the CBN may be entering the early stages of a policy recalibration.<\/p>\n

Nigerian Eurobonds were not left out, with average yields declining by 11bps to 7.56% as global investors responded to signals of easing domestic monetary conditions and better macroeconomic coordination.<\/p>\n

What they are saying<\/p>\n

While the MPR was held at 27% for the second consecutive meeting, the asymmetric corridor change is widely viewed as a technical loosening of monetary conditions\u2014one that supports credit expansion without compromising inflation control.<\/p>\n

\u201cThe corridor adjustment acted as a liquidity cue for market participants,\u201d said a senior trader at a Lagos-based commercial bank.<\/p>\n

\u201cWith the SDF rate lowered, there\u2019s less incentive for banks to sterilise funds at the CBN, leading to higher liquidity in the money markets.\u201d<\/p>\n

The corridor now gives a lower rate for bank deposits and a higher cost for borrowing from the CBN, nudging commercial banks to deploy funds more actively into the economy.<\/p>\n

\u201cThis is a signal of accommodation beneath the surface,\u201d said Dr. Yemisi Ayinde, a monetary economist at Covenant University.<\/p>\n

\u201cIt doesn\u2019t compromise the disinflationary stance, but it introduces flexibility to ease liquidity pressures and support credit growth.\u201d<\/p>\n

Headline inflation eased to 16.05% in October 2025\u2014marking the third straight monthly decline\u2014driven by naira appreciation, relatively stable fuel prices, and better food supply.<\/p>\n

Analysts see this as giving the MPC room to make liquidity-friendly tweaks while maintaining a cautious posture.<\/p>\n

Implications for investor positioning and bank strategy<\/p>\n

For investors, the yield compression across tenors and asset classes suggests a shift in portfolio allocation strategies.<\/p>\n

With lower SDF returns, banks and institutional investors are likely to seek higher returns in government securities, corporate bonds, and credit markets.<\/p>\n

\u201cLower passive returns from the CBN window mean banks must redeploy idle funds more efficiently,\u201d said Mr. Blakey Ijezie, chartered accountant and founder of Okwudili Ijezie & Co.<\/p>\n

\u201cExpect to see renewed interest in credit expansion, particularly into productive sectors that offer better returns.\u201d<\/p>\n

For banks, the higher SLF rate serves as a disincentive for last resort borrowing, reinforcing the need for stronger interbank coordination and internal liquidity planning.<\/p>\n

Cordros Securities noted that the shift \u201ccould support further moderation in yields toward year-end, barring shocks,\u201d and expects the corridor move to maintain downward pressure across the fixed income curve.<\/p>\n

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