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Nigeria_Fixed Income Daily: Clarity to buoy market sentiment

Market commentary

Following some improvement in system liquidity to c.N231 billion (Previous: c.N200 billion), Interbank Call rate declined 112bps to 4.96%. At the FX interbank market, the Naira continued to trade range bound, appreciating 55kobo to NGN198.50/USD.Ahead of CBN’s briefing on the guidelines of the new currency market structure, trading in the T-bills market remained mildly bullish with yields declining 4bps on average across maturities. The 29DTM (-47bps) and 36DTM (-39bps) recorded the most notable declines in yields, closing at 0.89% and 2.87% respectively. Trading was however mixed in the bond market as yields trended in varied directions at the close of the session. Notably, yields on the 16.39% FGN JAN 2022 declined 26bps to 14.05% whilst yield on the 12.50% FGN JAN 2026 advanced 16bps to 14.24%.Result of today’s bond auction showed that the DMO sold N22 billion, N40 billion and N50 billion across the 5-year, 10-year and 20-year bonds at stop rates of 14.2%, 14.4% and 14.98% respectively. Although we note that the relatively higher auction rates could pressure yields in the secondary market, we however believe the overall euphoria of the new currency market framework could spur demand in the session ahead.