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Nigeria_Fixed Income: Yields advance as tepid trading persists

Market commentary

• The CBN announced an OMO auction offering N50 billion on the 310DTM bill. However, no sale was eventually made. Following a decline in system liquidity to about N196 billion (Post yesterday’s OMO mop-up), interbank placement rates advanced further in today’s session with the Call rate up 134bps to 4.92%. At the FX interbank market, the Naira depreciated 8 kobo to close at NGN199.05/USD.

• Following the announcement of an OMO auction, the T-bills market maintained a bearish trend as yields rose 19bps on average. The most notable yield advancements were recorded on the 23DTM (+57bps), 86DTM (+42bps), and 184DTM (+51bps) bills, closing at 4.11%, 7.70%, and 9.83% respectively. Likewise, bears continued to dominate the bond market amidst sustained cautious trading in the space as yields rose 17bps on average. Notably, yield on the 16.39% FGN JAN 2022 and 12.50% FGN JAN 2026 bonds climbed 25bps and 26bps to 14.01% and 13.98% respectively.

• The DMO released the June bond offer circular today offering a total of N105 billion (same amount as previous month) on the 5-yr (N15 billion), 10-yr (N40 billion), and 20-yr (N50 billion) bonds at next week’s monthly bond auction. Amidst the sustained risk-off sentiment, we expect trading in the fixed income market to remain broadly bearish at mid-week.