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Nigeria_Fixed Income Daily: T-bills market turns bullish as yields race southwards

• Market commentary

§ At yesterday’s Primary Market Auction (PMA), the apex bank sold N13 billion and N26 billion on the 91DTM and 182DTM at respective stop rates of 14.0% and 17.5% (effective yield: 14.51% and 19.17%). Meanwhile, Interbank Call rate advanced 17bps to 4.00%. At the FX interbank market, naira remained unchanged at N305.25 and N378.00 against the dollar for the spot rate and one year forward rate respectively.

§CBN continued with its liquidity mop up today selling N1.3 billion (offer: N30 billion) and N34.7 billion (offer: N40 billion) on the 196DTM and 357DTM at respective stop rates of 18.0% and 18.6% (effective yields:19.93% and 22.74%). Amidst this, trading in the T-bills was mostly bullish as yields declined 38bps on average following significant moderations across the 7DTM (-177bps), 112DTM (-114bps) and 140DTM (-160bps) to 11.47%, 15.60% and 17.68% respectively. However, the bonds market turned mixed with yields advancing on the short end of the space whilst yields on the long end of the curve declined. Notably yields on the 16.00% FGN JUN-2019, 7.00% FGN OCT 2019 and 15.54 FGN FEB 2020 advanced 2bps each to 15.70bps, 15.86% and 15.92% respectively. Conversely, yields on 12.50% FGN JAN 2026 and 12.40% FGN MAR 2036 moderated 3bps and 2bps to close at 16.05% and 15.79%.

§ Given the meagre sales level recorded at yesterday’s PMA and today’s OMO, we foresee possible liquidity mop up at week close. Barring this, we expect another bullish trading session in the T-bills space tomorrow as liquidity continues to support demand.