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Nigeria_Fixed Income Daily: Cautious trading trails market at mid-week

Market commentary

• Amidst tight system liquidity, Interbank Call rate advanced 75bps to 18.75%. At the FX Interbank spot market, the Naira depreciated 75kobo to NGN283.42/USD whilst trading at one year forward closed at NGN317.82/USD.

• Sentiment turned mixed in the T-bills market (following three (3) consecutive bearish sessions) as buying resurfaced across select maturities whilst sizeable sell pressure persisted on a few others maturities (pushing yields up 8bps on average). Consequently, whilst the 71DTM (-60bps) and 99DTM (-54bps) bills recorded the most notable yield declines to close at 12.16% and 12.07% respectively, the 92DTM (+268bps) and 169DTM (+229bps) bills witnessed the most sizeable sell pressure to close at 12.24% and 12.74% respectively. However, amidst a calmly traded session, sentiment remained largely bearish in the bond market as investors traded cautiously ahead of the outcome of the PMA. Yields advanced 20bps on average - particularly, yield on the 15.10% FGN APR-2017 bond advanced 58bps to 13.59%.

• We expect the mixed trading in the T-bills market to extend into tomorrow’s session as the modest OMO inflows of about N34 billion (scheduled for tomorrow) support demand marginally. The bond primary market auction (PMA) scheduled for today has been postponed by the DMO following some technical difficulties. Given this, we believe cautious trading will persist in the bond market tomorrow as investor’s continue to await the monthly bond auction and its outcome.