Nigeria_Fixed Income Daily: T-bills market remain upbeat amid sustained robust system liquidity

Market commentary

The CBN announced an OMO auction offering N50 billion on the 206DTM bill. However, the apex bank eventually sold N31.634 billion pegged at 8.8% (effective yield: 9.26%). Nevertheless, interbank Call rate moderated marginally - down 21bps to 4.25%. At the FX interbank market, the Naira depreciated 6 kobo to NGN199.25/USD.

Despite the liquidity mop up, sentiment turned bullish in the T-bills market as robust system liquidity supported demand across most traded maturities (yields down 23bps on average). Particularly, the 31DTM (-110bps) and 45DTM(-95bps) recorded the most significant yield moderation to close at 4.88% and 5.36% respectively. Meanwhile, trading in the bond market remained mixed as early buying bias on the short end of the bond space eased towards the end of trading session whilst sell pressure persisted on the long end of the curve. Notably, yield on the 16.00% FGN JUN 2019 bond declined 1bp to 10.54% whilst yield on the 12.40% MAR 2036 bond advanced 12bps to 13.06%.

The DMO released the much anticipated Q2’16 bond calendar showing a decrease in supply over the 5-year and 10-year bonds (Q’1: N182.5 billion vs Q’2: N80 billion) and an increase in supply for the 20-year bond (Q’1: N50 billion vs Q’2 N150 billion). Given that the calendar was released after the close of today’s trading session, we anticipate a mixed trading pattern in tomorrow’s trading session. However, we expect the robust system liquidity to continue to support demand in the T-bills market ahead of Wednesday’s PM