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Nigeria_Fixed Income Daily: Yields decline slightly as auctions loom

Market commentary

§ Picking up the trend from last week, the CBN conducted another OMO auction in today’s session, offering N50 billion apiece on the 177DTM and 352DTM bills. The apex bank eventually sold N8 billion and N53 billion on the 177DTM and 352DTM bills at respective stop rates of 18.0% and 18.6% (effective yields: 19.72% and 22.67%). Amidst this, Interbank Call rate inched 16bps higher to 3.33%. At the FX interbank market, the naira appreciated N0.50 to settle at N305.00 against the dollar at the spot market whilst the one year forward rate remained unchanged at N378.00.

§ The T-bills market kicked off the week with moderately bullish trading as yields declined 8bps on average. Buying momentum was weighted around the short-mid end of the space with yields on the 107DTM (-32bps), 114DTM (-48bps), and 128DTM (-45bps) bills down to 16.22%, 16.32%, and 16.98% respectively. Meanwhile, trading remained mixed in the bond market at the start of this week with yields on benchmark bonds trending in opposite directions. Whilst yield on the 16.39% FGN JAN 2022 bond moderated 10bps to 15.63%, yields on the 12.50% FGN JAN 2026 and 12.40% FGN Mar 2036 bonds rose 5bps each to 16.00% and 16.04% respectively.

§ Notwithstanding the slightly upbeat start to the week, we expect more cautious trading tomorrow as investors keep an eye on the outcome of the bond and T-bills auctions scheduled for tomorrow. The DMO will conduct its monthly bond auction with N35 billion, N25 billion, and N35 billion on offer on the 5-year, 10-year, and 20-year bonds respectively. Meanwhile at the Primary Market Auction, the CBN will offer N71 billion, N48 billion, and N26 billion on the 91-day, 182-day, and 364-day bills in anticipation of Thursday’s bill maturities.