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Nigeria_Fixed Income Daily: Yields maintain upward trend at week open

Market commentary

• Amidst tighter system liquidity (down c.N126 billion to c.N41 billion), Interbank Call rate spiked 875bps to 18.17%. At the FX Interbank spot market, the Naira appreciated 28kobo to NGN282.47/USD whilst trading at one year forward closed at NGN317.82/USD.

• Trading sentiment remained bearish in the T-bills market at week open as the higher yields from last week’s PMA (where 364DTM bill closed at an effective yield of 17.6%) remained firmly in focus amidst tighter liquidity. Yields advanced 94bps on average with the largest rise recorded on the short end of the space – most notable were the 10DTM (+435bps), 17DTM (+410bps) and 31DTM (+350bps) bills closing at 11.26%, 11.20% and 11.48% respectively. Likewise, yields maintained an upward trend in the bond market in today’s session as investor’s continued to eye the soon to be released June inflation figures. The most significant uptick in yields were recorded on the 15.10% FGN APR 2017 and 15.54 FGN FEB 2020 bonds, up 53bps and 59bps to 12.78% and 14.45% respectively.

• The DMO released the July bond offer circular today, offering N40 billion each on the 5-year (new issue), 10-year (re-issue), and 20-year (re-issue) bonds - totaling N120 billion (vs. June: N105 billion). Ahead of this auction on Wednesday, we expect market sentiment to remain largely bearish as the yield curve continues to adjust towards the T-bills auction levels.