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Nigeria_Fixed Income Daily: Mixed sentiment persists in T-bills market

Market commentary

• Interbank placement rates moderated further in today’s session, with the Call rate down 75bps to 3.33%. At the FX interbank market, the Naira appreciated 35 kobo to NGN198.75/USD, after recording an intraday high of NGN198.00/USD.
• As anticipated, whilst yields moderated on the short end of the T-bills space in today’s session, tepid sentiment persisted on the long dated bills as yields declined 4bps on average. Particularly, the yield on the 23DTM bill declined 21bps to 3.88% whilst the yield on the 184DTM bill advanced 23bps to 9.07%. Surprisingly, the bond market traded relatively upbeat as yields across all traded maturities declined 12bps on average (save for the 15.54 FGN FEB 2020 bond). The modest demand recorded in today’s session largely was attributed to demand from institutional investors (particularly PFAs) as yields appear attractive following recent upward shift in the yield curve.
• We expect yield direction to remain mixed in the T-bills market tomorrow (barring any OMO auction), as the modest system liquidity continues to support demand on the short end of the bills space. However, given that the fundamentals remain largely unchanged, we expect the bond market to trade cautiously with a bearish bias.