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Nigeria_Fixed Income Daily: Yields open higher amidst tight liquidity

• Market commentary

§ Interbank Call rate advanced 583bps to 15.50% following CBN’s strict tightening stance in the previous week. At the FX interbank market, the naira depreciated N4.31 against the dollar to open the week at N308.81 at the spot market whilst the one year forward rate remained unchanged at N348.14.

§ Fixed income markets began the week on a rather muted note as mixed trading (albeit with a bearish bias) emerged in today’s trading session. Yields in the T-bills market closed a marginal 2bps higher amidst notable sell pressure on some mid-dated maturities which outweighed the yield declines observed at other ends of the space. Specifically, whilst yields on the 122DTM (+120bps) and 143DTM (+110bps) bills advanced to 19.57% and 19.24%, yields on the 80DTM (-100bps) and 255DTM (-59bps) bills moderated to 16.65% and 20.56% respectively. The bond market was more bearish although yields on benchmark bonds were up only 2bps on average. Notably, all benchmark bonds experienced yield advances at the start of the week. The largest advances were observed on the 14.20% FGN MAR 2024 and 12.40% FGN MAR 2036 bonds which rose 4bps and 2bps to settle at 14.99% and 15.44% respectively.

§ As expected, demand was meek at the start of the week and we expect the relatively tight system liquidity to further curtail market activities. Hence, we foresee similar bearish trading tomorrow.