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Nigeria_Fixed Income: Yield descent persisted ahead of MPC decision

Market commentary

• Interbank Call rate declined 25bps to 13.75% amidst a relatively unchanged system liquidity. At the FX interbank market, the naira remained unchanged at N305.00 against the dollar at CBN FX spot rate market whilst the naira depreciated against the dollar at the one year forward market to N378.00 (Previous: N349.00).

• Bulls remained prominent in today’s trading session as participants bet on a HOLD verdict at the final Monetary Policy Committee (MPC) of the year. Though weaker than yesterday, demand in the T-bills market continued to steer yields lower (16bps on average) with the short dated bills recording the largest declines – 9DTM (-73bps), 16DTM (-102bps), and 58DTM (-81bps) down to 11.52%, 10.34%, and 14.97% respectively. Similarly, buying strengthened in the bond market as yields on benchmark bonds declined 16bps on average. Notably, yields on the 12.50% FGN JAN 2026 and 12.40% FGN MAR 2036 bonds declined 20bps and 22bps to 15.95% and 15.97% respectively.

• In line with market expectation, the MPC unanimously decided to leave all policy rates unchanged (MPR at 14%, CRR at 22.5% and LR at 30%) at the conclusion of its 2-day meeting today. Given that this decision was largely in line with market expectation and barring any OMO mop-up, we believe the market will continue to ride on the recent upbeat sentiment and foresee further downtrend in yields tomorrow.