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Nigeria_Fixed Income: Yields trend northwards following OMO mop up

Market commentary

• The CBN announced an OMO auction offering N40 billion on the 225DTM bill. The apex bank eventually sold N56.1 billion at a stop rate of 9.5% (effective yield: 10.09%). Consequently, interbank placement rates inched higher, with the Call rate up 50bps to 3.83%. At the FX interbank market, the Naira remained unchanged at NGN198.75/USD, after recording an intraday low of NGN199.16/USD.

• Taking a cue from the relatively high stop rate at the OMO auction, yields in the T-bills market trended north as traders sold off across most maturities. Overall, yields climbed 17bps on average. Notably, the yields on the 106DTM (+90bps), 190DTM (+45bps), and 232DTM (+74bps) bills recorded the most sizeable rise to close at 8.70%, 9.98%, and 9.63% respectively. Similarly, sentiment turned bearish in the bond market as yields advanced 19bps on average. Yields on the 15.10% FGN APR 2017 and 15.54 FGN FEB 2020 bonds rose 30bps and 25bps to 11.38% and 12.76% respectively.
• Whilst we expect the N96.4 billion OMO maturities scheduled for tomorrow to boost system liquidity, we anticipate another OMO mop-up tomorrow as the CBN continues to maintain its tightening stance. Consequently, we expect yields to remain elevated across the fixed income space.