Fixed Income Market Report for 1st of June 2017

The bond market was very quiet yesterday with minimal trades consummated during the trading session. Attractive short term yields (T-bills) continues to take the shine of bonds as investors sentiments have been skewed towards the high short term yields at effective rate of 22.00%.  Total volume traded was below N1billion reflecting the weak appetite for FGN bonds . We expect another quiet trading session today as we wrap up the week.
 
The Treasury Bills market continued on a bullish run yesterday with intense buying on the  short end of the curve (June to August 2017 maturities) . The medium and long end of the curve also witnessed decent demand with yields declining by an average of 25bps. Spill over demand from the T-bills PMA and improved naira liquidity supported the rally as counterparties cherry-picked T-bills with attractive yields across the curve .  We expect the market to remain bullish as  naira liquidity lingers in the system. Demand will be skewed towards the short end of the curve as we expect more supply of medium and long tenured T-bills via OMO auctions today.
 
The OBB and O/N rates declined further to close at 8.67% and 9.42% due to cash inflows from the N64.75Billion OMO T-bills maturity credited into the system.  Market liquidity is estimated at N95billion positive as at close of business yesterday.  Interest rates are expected to close the week  on a calm note,  however, we anticipate the CBN to continue their tight stance on liquidity via OMO T-bills issuance and FX interventions.
 
The local unit opened at  NGN310.00/$1  and remained unchanged over the course of the trading session. Rates eventually closed at NGN305.45/$1 as the CBN injected some FX  liquidity in the market.  We expect the CBN to continue to intervene in the interbank market to calm the demand for FX.
 

FGN BOND CLOSING LEVELS    
Description Bid Yield (%) Offer Yield (%)
16.00 29-JUN-2019 16.47 16.37
15.54 13-FEB-2020 16.38 16.28
14.50 15-JUL-2021 16.51 16.41
16.39 27-JAN-2022 16.24 16.14
14.20 14-MAR-2024 16.03 15.93
12.50 22-JAN-2026 16.19 16.09
16.2884 24 MAR 2027 16.33 16.23
12.1493 18-JUL-2034 16.07 15.97
12.40 18-MAR-2036 16.07 15.97
     
TBILLS CLOSING LEVELS    
Maturity Bid Discount (%) Offer Discount (%)
31-Aug-17 16.95 18.25
30-Nov-17 18.55 18.30
3-May-18 18.40 18.15

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