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Nigeria_Fixed Income Daily: Yields moderate further at mid-week

• Market commentary

§The DMO conducted its monthly bond auction, selling N3.2 billion, N25 billion, and N41 billion on the 5-year, 10-year, and 20-year bonds at respective stop rates of 15.99%, 16.24% and 16.43%. Also, the CBN offered N71 billion, N48 billion, and N26 billion on the 91-day, 182-day, and 364-day bills (yet to release result) to mop up liquidity from tomorrow’s bill maturities. Despite this, Interbank Call rate moderated 33bps to 3.00%. At the FX interbank market, the naira held at N305.00 against the dollar at the spot market whilst the one year forward rate appreciated N29.00 to close at N349.00.

§The T-bills market continued to trade bullish as yields declined 18bps on average. The most notable declines were recorded on the 148DTM (-85bps), 211DTM (-60bps) and the 36DTM (-54bps) with their respective yields closing at 17.75%, 19.46% and 11.04%. Trading in the bond market however remained mixed (albeit with a bullish tilt) as yields declined 4bps on the average across the benchmark bonds. Whilst yields on the 15.54% FGN FEB 2020, 14.20% FGN MAR 2024, and 12.1493% FGN JUL 2034 bonds moderated by 9bps, 14bps and 11bps respectively to close at 15.86%, 15.58% and 15.66%, yields on the 12.40% FGN MAR 2036 and 12.50% FGN JAN 2026 advanced 7bps each to close at 16.11% and 16.07% respectively.

§ With stop rates at the bond auction coming above prevailing secondary markets yields, we expect the bond market to turn slightly bearish. However, we expect the general trading sentiment to be dictated by the upcoming inflation data scheduled for tomorrow.