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Nigeria_Fixed Income Daily: Yields trend southwards following auction

Market commentary

• Following a modest rise in system liquidity to about N439 billion, interbank placement rates moderated marginally with the Call rate down 17bps to 3.25%. At the FX interbank market, the Naira remained unchanged for the third consecutive session at NGN199.05/USD, retracing from an intraday high of NGN198.95/USD.

• As expected yields in the T-bills market trended lower in today’s trading session following yesterday’s lower PMA rates amidst a healthy system liquidity. Overall, yields declined 30bps on average with the 21DTM(-64bps), 49DTM(69bps), and 259DTM(79bps) bills recording the most notable declines to close at 4.83%, 6.33%, and 10.24% respectively. Similarly, trading sentiment was broadly upbeat in the bond market amidst a calmly traded session as yields declined 11bps on average in the space. Notably, yields on the 15.10% FGN APR-2017 and 12.1493% FGN JUL 2034 bonds declined 31bps and 7bps to 10.75% and 13.60% respectively.

• Whilst we expect the decent system liquidity to continue to support demand on the short end of the yield curve, we anticipate a calmly traded session in the bond market at week close as market participants stay cautious.