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Nigeria_Fixed Income Daily: Buoyant liquidity drives investor demand

§In line with recent liquidity mop up stance, CBN conducted OMO auctions in today’s session, offering N100 billion and N50 billion on the 191DTM and 282DTM bills. The CBN eventually sold N198 billion and N7 billion on the 191DTM (effective yield: 19.87%) and 282DTM (effective yield: 20.91%) bills amidst strong subscription numbers. Despite this, Interbank Call rate moderated significantly to 8.21% (previous: 26.67%) on the back of liquidity inflows from today’s bond maturity (c. N581 billion). At the FX interbank market, the naira appreciated N3.69 to close at N313.65.

§In today’s session, fixed income markets shrugged off recent negative sentiment amidst buoyant system liquidity. In the T-bills market, yields declined 17bps on average with modest demand across the entire space. Notably, yields on the 79DTM (-86bps), 156DTM (-251bps), and 353DTM (-45bps) bills closed at 16.81%, 17.43%, and 22.04% respectively. However, the bond market traded mixed, with yields moderating 8bps on average. We witnessed modest demand on the short-mid end of the space as yields on the 16.00% FGN JUN 2019 and 15.54% FGN FEB 2020 bonds moderated 6bps and 12bps to close at 15.14% and 15.03%.

§At the August bond auction scheduled for tomorrow, the DMO will offer N110 billion across the 5-year, 10-year, and 20-year bonds. Whilst we expect yield levels at the auction to remain relatively high (in line with recent trend), we expect the improved system liquidity from today’s maturities to further support demand tomorrow.