Nigeria_Fixed Income Daily: Market trades cautiously ahead of auction result

Market commentary

• With system liquidity around the N200 billion region, interbank Call rate declined 16bps to 7.35%. At the FX interbank market, the Naira remained unchanged at NGN199.05/USD after recording an intraday high of NGN197.65/USD.

• Trading in the fixed income market opened relatively cautious as market participant looked forward to the T-bills and bond primary market auctions (PMA) result for yield direction. Market sentiment however turned upbeat in the T-bills market as yields declined across most maturities – down 11bps on average. Particularly, yields on the 64DTM and 148DTM bills declined 49bps and 59bps to 6.34% and 7.71% respectively. The bond market however traded mixed as yield directions varied across most maturities. Whilst yield on the 12.50% FGN JAN 2026 bond advanced 7bps to 12.04%, the yield on the 16.39% FGN JAN 2022 bond shed 16bps to 11.34%.
• The DMO sold N100 billion worth of bonds across the 5-year, 10-year, and new issue 20-year bonds clearing at stop rates of 11.34%, 12.09%, and 12.40% respectively. At the T-bills auction, the CBN sold N166.6 billion across the 91DTM, 182DTM, and 364DTM bills at effective yields of 5.83%, 8.28%,and 10.07% respectively. Given that auctions yields came in relatively lower than secondary market levels (on average), we expect the inflow from tomorrow’s OMO maturities to support demand. However, we expect market participants to trade cautiously amidst inflation concerns.