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Nigeria_Fixed Income Daily: yields inch up despite

Market commentary

System liquidity improve significantly to c.N1 trillion (previous: c.N231 billion) on the back of FX refund, sending Interbank Call rate down 313bps to 1.83%. The CBN announced an OMO auction, offering N50 billion on a 308DTM but no sale was made eventually. At the FX interbank market, the Naira remained unchanged at NGN198.50/USD. From yesterday’s PMA, CBN sold N48.01 billion, N29.00 billion and N152.3 billion across the 91DTM, 182DTM and 364DTM at effective yields of 8.16%, 9.81% and 13.62% respectively. With the auction rates higher than the secondary market levels, trading in the T-bills market opened on a bearish note but turned slightly positive towards the end of the session as the robust system liquidity supported demand. Overall, yields advanced 24bps on average across all maturities, with the 35DTM and 42DTM bills recording the most notable pressure – yields up 87bps and 97bps to 2.87% and 3.40% respectively. Similarly, trading in the bond market was choppy intra-day, with major sell offs dominating modest demand observed on a few maturities. Notably, yields rose 17bps on average across maturities with the 15.10% FGN APR 2017 and 12.40% FGN MAR 2036 recording the most advances - up 26bps and 32bps to 11.28% and 14.68% respectively. Following today’s liquidity inflow, we anticipate another OMO auction announcement in a bid to mop up liquidity. Whilst we see this as a potential trigger for a sell bias in the secondary market, we think the robust market liquidity would put a lid on yield movement. That said, we believe the market could trade mixed at week close.