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Nigeria_Fixed Income Daily: Market upbeat ahead of auction result

Market commentary

• Following a marginal moderation in system liquidity to about N413 billion, the interbank placement rates remained relatively flat with the Call rate up 2bps to 3.42%. At the FX interbank market, the Naira remained unchanged at NGN199.05/USD, retracing from an intraday high of NGN198.98/USD.

• Ahead of the outcome of today’s T-bills primary market auction (PMA), sentiment turned upbeat in the T-bills market as robust system liquidity buoyed demand across most maturities in the space. Consequently, yields declined 38bps on average in the space with the most significant demand recorded on the 8DTM (-170bps), 15DTM (-182bps), and 29DTM (-119bps) bills closing at 4.35%, 5.19%, and 5.39% respectively. Sentiment however turned mixed in the bond market, albeit with a mild bullish bias, as buying on the short-mid dated bonds outweighed tepid trading on the long end (yields down 7bps on average). Whilst yield on the 16.39% FGN JAN 2022 bond declined 23bps to 13.49%, the yield on the 12.1493% FGN JUL 2034 bond advanced 13bps to 13.67%.

• At today’s T-bills PMA, the CBN sold N143.65 billion across the 91DTM, 182DTM and 364DTM bills clearing at stop rates of 7.99%, 9.05% and 11.10% (effective yields: 8.15%, 9.48%, and 12.48%) respectively. We expect the lower yield levels at the auction (100bps lower on average) coupled with the decent system liquidity to further support demand in the T-bills market in tomorrow’s session. That said, we expect sentiment on the short end of the bond market to remain relatively upbeat tomorrow, while trading on the mid-long dated maturities remains broadly tepid as investors stay cautious.