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Nigeria_Fixed Income Daily: Bond yields moderate at week open

• Market commentary

§ The CBN held an OMO auction at the start of the week, selling N25.5 billion and N94.7 billion on the 185-day and 339-day bills at respective stop rates of 18% and 18.50% (effective yields: 19.81% and 22.34%). Despite this and following imminent FAAC inflow, Interbank Call rate moderated 400bps to 10.00%. At the FX interbank market, the naira depreciated by N0.25 against the dollar at week open to settle at N305.00 whilst the one year forward rate remained unchanged at N348.14.

§ Fixed income markets began the week on diverging paths as mixed trading surfaced in the T-bills market whilst bonds began the week relatively bullish. Whilst yields in the T-bills market were up 9bps on average, there were sharp variations on select maturities with yields on the 87DTM (-161bps) and 101DTM (-107bps) bills moderating to 14.57% and 16.93% even while yields on the 73DTM (128bps) and 255DTM (146bps) bills climbed to 17.68% and 20.90% respectively. In contrast, the bond market kicked the week off bullish as yields on benchmark bonds fell 9bps on average. The most significant declines were on the yields of the 16.00% FGN JUN 2019, 14.20% FGN MAR 2024, and 12.1493% FGN JUL 2034 bonds which closed at 14.48%, 14.93%, and 15.05% respectively.

§ Although some upbeat sentiment has been apparent at the start of the week, we anticipate more reticent trading tomorrow amidst tighter system liquidity following CBN liquidity mop up.