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Nigeria_Fixed Income: Yields trend north following auction

Market commentary

• Interbank placement rates advanced in today’s session, with the Call rate up 91bps to 19.8% amidst tighter liquidity. At the FX Interbank spot market, the Naira appreciated 34kobo to NGN294.23/USD.

• Whilst the CBN offered N128 billion at today’s T-bills primary market auction, the apex bank eventually sold N205 billion across the 91DTM (N36.8 billion), 182DTM (N39.2 billion), and 364DTM (N129 billion) with stop rates pegged at 14.14%, 15.49% and 16.48% (effective yields of 14.66%, 16.78%, and 19.72%) respectively. Amidst a calmly traded session, sentiment turned mixed in the T-bills market as slight buying resurfaced on the short dated maturities whilst sell pressure persisted on a few mid-dated maturities. The most notable selloffs were recorded on the 141DTM (+205bps) and 162DTM (+30bps) bills closing at 15.18% and 15.78% respectively, whilst the 22DTM (-32bps) and 92DTM (-58bps) bills witnessed the most sizeable demand closing at 13.62% and 12.81% respectively. Trading however remained bearish in the bond market as sell pressure across most maturities steered yields 11bps higher on average. Particularly, yields on the 16.00% FGN JUN 2019 and 16.39% FGN JAN 2022 bonds advanced 26bps and 24bps to close at 14.71% and 15.02% respectively.

• With rates at the auction closing significantly above current secondary market levels, we expect yields to trend further north in tomorrow’s session. That said, we anticipate relatively cautious trading sentiment in the days ahead as next week’s MPC meeting comes into focus.