Fixed Income Market: Day in review and outlook

Negative Performance Returns In Local Bourse
Upward Trajectory Persists In The Domestic Bourse

Yesterday, interbank funding rates, OBB & OVN, increased to 6.33% and 7.08% respectively (previously 5.83% and 6.92%) as Sukuk debit of N162.6bn dragged the overall liquidity levels at the interbank market. Accordingly, activity at the Nigerian Treasury Bills Market was lethargic as average yield remained flat at 3.39%. However, we observed some buying interest at the OMO and Bond market as yields declined by an average of 4bps and 8bps to 4.89% and 9.90% respectively.

Today, the Debt Management Office (DMO) is planning to raise a total of N164.6bn at the primary bond (N150.0bn) and treasury bills (N14.6bn) markets. Notably, we expect demand at both auctions to remain strong, as institutional funds would be looking to reinvest expected proceeds of Thursday’s Treasury bills (N14.6bn) and OMO (N352.83bn) maturities. Accordingly, we expect marginal rates at the respective auctions to remain low, falling from their prior auction levels.

Fixed Income Market: Day in review and outlook - Brand Spur

Looking ahead, we note that the DMO has raised c. 40.0% or N876.0bn of its net domestic
borrowing target for 2020 (N2.2tn), leaving N1.3tn left for its issuance programme in 2020.
This makes a strong case for an upward repricing in Bond yields later in the year when net-inflows from OMO maturities to local investors (ex. banks) starts to thin out.

United Capital Research