Report

Nigeria_Fixed Income Daily: OMO auction drives selloff at week close

Market commentary

The CBN conducted an OMO auction in today’s session, offering N30 and N60 billion across the 181DTM and 342DTM bills respectively. Eventually, the apex bank sold N82.6 billion and N309 billion across both bills at respective stop rates of 18.0% and 18.6% (effective yields: 19.76% and 22.08% respectively). Following the liquidity mop-up, the interbank Call rate rose 550bps to 10.5%. Whilst naira remained unchanged at the spot market at N305.25, the one year forward rate depreciated N29.00 to N378.00.

Following the OMO auction, sentiment in the T-bills market turned mixed, albeit with a bearish bias as yields advanced 13bps on average. Particularly, yields on the 11DTM (+129bps), 13DTM (+120bps) and 20DTM (142bps) bills closed at 12.15%, 13.28% and 15.94% respectively. Similarly, selling dominated the bond market at week close as yields across benchmark bonds rose 9bps on average. Notably, yields on the 15.54% FEB FGN 2020 and 12.50% JAN FGN 2026 bonds climbed 9bps and 14bps to 16.12% and 16.77% respectively.

We believe the resulting pressure on system liquidity following today’s OMO sale would further cap demand for bills in the next trading session. We also believe investors in the bond market will trade cautiously in anticipation of the February bond circular scheduled for release next week.

Provider
Vetiva Capital Management
Vetiva Capital Management

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