Primary Market Auction: DMO Struggles To Keep Rates Low, Raises 1-Yr Rate By 200Bps

Naira Gains against the USD at the Bureau De Change, Parallel (“black”) Markets Brandspurng
Afolabi Sotunde Illustration Naira

Primary Market Auction: DMO Struggles To Keep Rates Low, Raises 1-Yr Rate By 200Bps

FGN Bonds

The FGN Bond market suffered yet another quiet trading session, as market participants focused on the posture from the Debt Management Office (DMO) at the NTB Primary Market Auction on the day.

Yields continued to expand, especially at the belly of the curve, with selling pressure on the 2026s, 2028s and 2029s papers pushed the bond yield curve up by c.2bps on the average.

As expected, the DMO’s response to the increase in short-term rates harmed the bond yields. With this firm in their minds, we expect investors to continue to act on their expectations for higher yields by staying away from longer duration amidst this volatility. 

Treasury Bills

The secondary market of Treasury Bills took a backseat in today’s trading session, as all eyes were on the primary market auction. Offers were seen across the NTB and OMO curves, but with no-bid interests could be firmed up. Reflecting the uncertainty of the DMO’s auction spreads widened on the average rising by c.36%bps on the average across the benchmark bills curves.

At the Primary Market, pressures from investors for higher interest rates bided proved too much for the DMO as it struggled to keep a handle on single-digit borrowing rates. Demand at the auction was weak, with a much wider range of bids as investors were expectant the NTB rates will follow the precedent set by the CBN at last week’s c438bps average rise in OMO stop rates.

The DMO managed some of the pressure by moving more volumes to shorter-dated tenors and redeeming a portion of the 364-day maturing bills. The stop rates eventually closed higher by c.45bps, c.70bps and 200bps to close at 1.00%, 2.00% and 4.00% for the 91-, 182- and 364-day tenors.


We expect a more volatile trading session tomorrow, as the market attempts to price-in the effects of consecutive rate hikes at the last two primary auctions. 

Money Markets

System liquidity improved opening today, as the market opened at N486Bn net positive (c.71% higher D/D). OBB and OVN rates consequently crashed further by 350bps on the average to close at 5.00% and 5.25% respectively.

We expect interbank rates to oscillate in tandem to the system liquidity tomorrow, with pressure expected from the weekly anticipated OMO auction. 

FX Market

Traded volumes lower at the IEFX market remained stable D/D, with the Naira still trading above the N400.00/$ at the official windows (the first traded at these levels in the official markets so far this year). The parallel market stabilized a bit from the recent moves in rates, with cash and transfer rates closing unchanged at N473.50/$ and N489.50/$ respectively.


The NGERIA Sovereigns received a return of positive flows in today’s session, as yields across the sovereign curve compressed by c.2bps on the day. The newly issued Egypt papers started its open trading on a positive note, with prices improved by 0.75c on the average at the session’s open similar to the gains witnessed across most of the SSA Sovereigns Space.

The issuance of the new Ecobank Nigeria Limited dominated most of the attention of the trading session of the NIGERIA Corps as most tracked papers faced selling pressures most especially the related ETINL 2024s paper which saw its yield rise c.28bps at the close.

The Ecobank issue was highly successful, with being oversubscribed by 3X, as the bank stuck to is planned issuance amount of $300mio closed at 7.125% yield for the 5-year bond. This high unmet demand should push the bond to open on a positive note.