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Nigeria_Fixed Income Daily: Bearish sentiment persists, FI yields advance at week open

Market commentary

The CBN conducted an OMO auction in today’s session offering N50 billion apiece on the 199DTM and 353DTM bills. The apex bank eventually sold N33 billion and N34 billion on both bills at respective stop rates of 18.0% and 18.6% (effective yields: 19.96% and 22.68%). Following this, the Interbank Call rate advanced 358bps to 7.50%. At the FX interbank spot market, naira recorded a modest depreciation of 25kobo to N305.25 whilst the one year forward rate was unchanged at N378.00.

Expectedly the fixed income market opened the week to selloffs as bearish sentiment initially triggered by the recently released inflation figures persisted. In the T-bills market, yields climbed 42bps on average with selling weighted on the short end of the curve. The most significant advances were seen on the yields of the 10DTM (+120bps), 17DTM (+257bps) and 31DTM (+364bps) bills settling at 9.25%, 12.38% and 14.57% respectively. Similarly, yields on the benchmark bonds rose 6bps on average in the bond market. Particularly, yields on the 16.39% JAN FGN 2022 and 12.1493% FGN JUL 2034 bonds were up 5bps and 6bps to 15.73% and 15.63% respectively.

Amidst consistent OMO mop-ups and sustained weak market sentiment, we believe bears will continue to dominate the fixed income space in the coming sessions. However, we expect some improvement in sentiment in the later part of the week as FAAC inflows hit the system.