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Nigeria_Fixed Income Daily: Bond market trades mixed following PMA

Market commentary

• Interbank call rate rose further amidst persistent tight system liquidity, up 25bps to 19%. At the FX Interbank spot market, the Naira depreciated 22kobo to NGN283.10/USD whilst trading at one year forward closed at NGN317.82/USD

• Buying momentum strengthened in the T-bills market with demand weighted on the short to mid dated maturities. Overall, yields declined 24bps on average with demand most sizeable on the 28DTM (-88bps), 35DTM (-93bps), and 231DTM (-97bps) bills, closing at 11.13%, 11.03% and 12.94% respectively. Following the technical glitch observed yesterday, the bond primary market auction held today with the DMO selling N120 billion across the 5-yr (N30 billion), 10-yr (N35 billion), and 20-yr (N55 billion) bonds at stop rates of 14.50%. 14.90%, and 14.98% respectively. With the auction rates coming in slightly higher than secondary market levels, trading in the bond market turned mixed (with a mildly bullish bias) as buying interest picked up across the mid dated maturities, whilst sentiment remained tepid on the short end of the space.
• At week close, we expect mild demand on the short end of the yield curve as investors continue to cheery-pick. For the bond market, we foresee modest sell pressure across select maturities as yield continue to trend towards auction levels.