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Nigeria_Fixed Income: Buying strengthens despite tighter liquidity

Market commentary

• Today, the CBN announced an OMO auction offering N50 billion each on the 224DTM and 350DTM bills. Eventually, N248 billion was sold across both maturities, clearing at stop rates of 18.0% (effective yield: 20.2%) and 18.5% (effective yield: 22.49%) respectively. Consequently, the Interbank Call rate advanced 225bps to 19.9%. At the FX interbank market, the naira appreciated N2.93 to close at N313.31.

• Despite the liquidity mop-up, buying momentum strengthened in the T-bills market in today’s session spurred by the relatively lower than expected stop rates (particularly 91DTM and 364DTM bill) recorded at yesterday’s NTB Primary Market Auction. Consequently, yields in the space declined 13bps on average. Notably, the 98DTM (-155bps), 252DTM (-101bps), and 287DTM (-147bps) bills recorded the most sizeable yield declines, closing at 14.30%, 18.34%, and 19.27% respectively. Shrugging off weak economic data released yesterday, improved buying bias in the bond market steered yields 12bps lower on average. Particularly, yields on the 16.00% FGN JUN 2019 and 15.54 FGN FEB 2020 bonds declined 36bps and 28bps to 14.97% and 14.76% respectively.

• Whilst we note the upbeat sentiment in today’s trading session, we anticipate a mixed sentiment at week close as market participants cherry-pick across the yield curve amidst sustained tightness in system liquidity.