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Nigeria_Fixed Income Daily: Momentum in T-bills market softens on PMA results, OMO auction

• Market commentary

§ The CBN conducted an OMO auction in today’s session, offering N50 billion each on the 182DTM and 350DTM bills. Interbank Call rate however remained unchanged in today’s session. At the FX interbank market, naira spot rate and one year forward rate were also unchanged at N305.00 and N349.00 respectively.

§ Results of yesterday’s T-bills PMA showed that the apex bank sold N117.18 billion (same as amount offered) across the 91DTM, 182DTM, and 364DTM bills at stop rates of 13.99%, 17.49%, and 18.69% respectively (effective yields: 14.49%, 19.16%, 22.97% ). With the auction yield on the 364DTM bill coming in higher than secondary market levels (22.97% vs 21.87%) and following the OMO announcement, momentum weakened in the T-bills market as sell pressure on the mid-long dated maturities outweighed sustained demand on short-dated bills. Overall, T-bills yields rose 19bps on average with the most sizeable rise in yields recorded on the 175DTM (+110bps), 266DTM (+59bps), and 273DTM (+57bps) bills closing at 20.00%, 21.47%, and 21.45% respectively. Similarly, a slightly bearish bias persisted in the bond market as yields in the space rose 3bps on average. The largest yield movement was recorded on the 14.20% MAR 2024 bond, up 4bps to 15.89%.

§ Whilst result of today’s OMO auction is yet to be released (as at when writing this report), we expect bearish sentiment to persist in the T-bills market in tomorrow’s session as yields on the long end of the space adjust further to PMA levels. We also believe trading in the bond market will remain tepid amidst sustained weak market activity.