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Nigeria_Fixed Income Daily: CBN mop up drives yields up at week close

• Market commentary

§ Consistent with its tightening stance throughout the week, the CBN closed the week with another OMO auction, where it sold N25.6 billion and N26 billion on the 174-day and 356-day bills (no sale on the 104-day bill) at respective stop rates of 18.0% and 18.5% (effective yields: 19.69% and 22.57%). Following this, Interbank Call rate advanced 84bps to 9.67%. At the FX interbank market, the naira appreciated N0.50 against the dollar to close the week at N304.50 at the spot market whilst the one year forward rate remained unchanged at N348.14.

§ Fixed income markets ended the week bearish as tighter liquidity took its toll. In the T-bills market, yields ascended 47bps on average amidst sell offs on the short-dated maturities. In particular, yields on the 20DTM (+214bps), 48DTM (+260bps), and 83DTM (+159bps) bills rose to 17.14%, 18.16%, and 17.65% respectively. The bond market was also moderately bearish with yield advances on all but one of the benchmark bonds. The most notable swings were on the 15.54% FGN FEB 2020 and 12.50% FGN JAN 2026 bonds which advanced 6bps and 3bps to close at 14.97% and 15.41% respectively.

§ Today’s trading is a microcosm of the week’s activities as persistent CBN liquidity mop up dampened buying sentiment across the space. Following this, we expect a sluggish start to next week as constrained liquidity continues to weigh on buying sentiment.