Offshore Investors Rally 10-Year Bond following Decline in CPI Inflation


**Nigerian consumer inflation falls to 11.22% in June*** – NBS

Bonds: Demand Interests remained stable in the FGN bond space, with yields relatively unchanged on the day, as market players remained cautious ahead of the Q3 FGN Bond Calendar release. We, however, witnessed some offshore interest around the 10-Year bucket, with yields lower by c.26bps on the 2028s, following the 18bps decline in the Headline Inflation Index released earlier in the day.

We expect the market to remain slightly bullish, with demand interests expected to be sustained from the c.N100bn bond coupon payments this week.

Treasury Bills: The T-bills market remained bullish, with yields lower by c.20bps on the day, as demand interest was bolstered by the surplus system liquidity levels and continued lack of OMO auction by the CBN. Demand interests remained focused around the mid to long end of the curve.

[READ: Capital Inflow Hits Highest Level Since Q3 2014]

We expect yields to remain slightly bullish, as market players anticipate the c.N108bn NTB auction on Wednesday.

Money Market: Rates in the money market remained relatively stable on the back of the robust system liquidity levels. The OBB and OVN rates consequently ended the session at 2.71% and 3.43%, with system liquidity currently estimated at c.N245bn positive.

We expect rates to remain stable as there are no significant outflows anticipated.

FX Market: At the interbank, the Naira/USD rate fell by 5k to N306.95/$ (spot), with SMIS rate also lower by 2k to N357.70/$. The NAFEX rate at the I&E window rose markedly higher by 31k to N361.10/$, whilst the market turnover rose by c.70% to $161m. At the parallel market, the Cash rate dipped by 40k to N358.10/$, while the transfer rate remained stable at N361.50/$.

Eurobonds: There was renewed interest in the NIGERIA Sovereigns, with yields lower by c.5bps on the day. We witnessed the most interest on the long end (32s – 49s) which gained c.0.5pct during the session.

In the NIGERIA Corps, yields remained relatively stable across the traded securities.

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Disclaimer: Whilst proper and reasonable care has been taken in the preparation and accuracy of the facts and figures presented in this report, no responsibility or liability is accepted by Zedcrest Capital or its employees for any error, omission or opinion expressed herein. This report is not an investment advice or a research recommendation and should not be regarded as such. The information provided herein is by no means intended to provide a sufficient basis on which to make an investment decision.

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