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Nigeria_Fixed Income Daily: Anemic demand clouds bond auction

• Market commentary

§ Interbank Call rate moderated 16bps to 25.17% amidst a relatively unchanged system liquidity. At the FX interbank market, the naira depreciated N0.25 against the dollar to close at N305.50 in the spot market whilst the one year forward remained unchanged at N355.

§ At today’s T-bills Primary Market Auction, the CBN sold N37 billion, N34 billion, and N87 billion on the 91-day, 182-day, and 364-day bills at respective stop rates of 13.99%, 17.40%, and 18.70% (effective yields: 14.50%, 19.05%, and 22.99%). Also, the Debt Management Office conducted its monthly bond auction today with N95 billion on offer across 5-year, 10-year, and 20-year bonds. Eventually, the DMO sold N5 billion, N14 billion, and N20 billion each on the 5-year, 10-year, and 20-year notes at respective marginal rates of 15.48%, 15.98%, and 15.95. Meanwhile, the T-bills market traded mixed as yield movement varied across the space. Declines in short-dated maturities such as the 22DTM (-126bps) bill which fell to 14.89% were outweighed by advances on mid to long-dated maturities such as the 134DTM (+79bps) and 288DTM (+61bps) bills which climbed to 19.46% and 22.35%. In contrast, the bond market traded bearish with yields on benchmark bonds rising 6bps on average. The most significant yield advances were recorded on the 16.00% FGN JUN 2019 and 12.50% FGN JAN 2026 bonds which rose 21bps and 8bps to close at 14.99% and 15.72% respectively.

§ Broad market sentiment remains bearish, highlighted by the tepid subscription levels at the monthly bond auction. Considering this, we anticipate further sell pressure in tomorrow’s session.