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Nigeria_Fixed Income Daily: Mixed trading pattern persists at week open

• Market commentary

§ At the start of the week, the CBN conducted an OMO auction offering N30 billion on the 150DTM and 318DTM bills. The apex bank eventually sold N22 billion and N201 billion at respective stop rates of 18% and 18.6% (effective yields: 19.44% and 22.20%). Despite this, Interbank Call rate moderated 41bps to 7.92%. At the FX interbank market, the naira remained unchanged at N305.00 and N378.00 against the dollar for the spot rate and one year forward rate respectively.

§The fixed income market trend remained the same at week open as slightly bullish sentiment on T-bills contrasted with the bearish sentiment in the bond space. T-bill yields moderated 8bps on average with the largest declines observed on the mid-dated maturities. Specifically, yields on the 122DTM (-161bps), 234DTM (-135bps), and 241DTM (-170bps) bills moderated to 15.74%, 18.79%, and 19.36% respectively. Meanwhile, yields on benchmark bonds rose 11bps on average amidst advances across the entire space. Notably, yields on the 8.50% FGN NOV 2029 and 12.1493% FGN JUL 2034 bonds climbed 14bps and 16bps to close at 16.30% and 16.02% respectively.

§ The DMO released its Bond Issuance Calendar for Q1’17, outlining an average monthly issuance of N130 billion vs. average monthly issue of N100 in 2016. Whilst we expect bullish trading to persist in the T-bills market amidst healthy demand, we believe the higher volume on offer may further pressure bond yields higher in the days ahead.