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Nigeria_Fixed Income Daily: T-bill yields decline despite mop up

• Market commentary

§ The CBN held an OMO auction today, selling N19 billion and N98 billion on the 196-day and 364-day bills at respective stop rates of 18.0% and 18.5% (effective yields: 19.93% and 22.69%). Despite this, Interbank Call rate moderated 450bps to 10.00%. At the FX interbank market, the naira once again held at N304.75 against the dollar at the spot market whilst the one year forward rate decreased N28.15 to settle at N348.18.

§ At yesterday’s T-bills Primary Market Auction, the CBN sold N22 billion, N19 billion, and N47 billion on the 91-day, 182-day, and 364-day bills at respective stop rates of 14.0%, 17.5%, and 18.5% (effective yields: 14.51%, 19.11%, and 22.69%). In today’s trading session, the T-bills market continued its bullish trend as investor interest on the short-term maturities drove yields lower (down 20bps on average). In particular, yields on the 35DTM (-209bps), 42DTM (-180bps), and 63DTM (-165bps) bills declined to 15.22%, 15.41%, and 17.43% respectively. Meanwhile, the bond market traded slightly bearish with yields on benchmark bonds rising 4bps on average. Notably, yields on the 15.54% FGN FEB 2020 and 14.20% FGN MAR 2024 bonds advanced 10bps and 6bps to settle at 15.16% and 15.08% respectively.

§ Demand for bills has been resilient in the last few sessions but consistent CBN mop up may dampen activity in that space going forward. We anticipate more cautious trading pattern at week close.