Fixed Income Market

Fixed Income Market Records Mix Performance amid Rising Inflation Concern

Amidst rising inflation rate, the fixed income market recorded a mixed performance.

Chapel Hill Denham said while average secondary T-bills rate remained unchanged at 3.02%, average discount rate on secondary OMO bills fell further by 5 basis points (bps) to 4.62%.

The investment bank stated that this was largely on sustained buy-ins on mid (-13 bps to 4.28%) and long DTMs (-7 bps to 5.28%).

Fixed Income Market

However, the secondary bond market was relatively quiet, as primary market activities – rollover Nigerian Treasury Bills (NTB)  auction and June Bond auction – were underway.

Analysts explained that at the end of today’s session, average yield on benchmark bonds was unchanged at 9.51%.

Meanwhile, Chapel Hill Denham stated that the primary debt market was very active.

At the primary NTB auction, the Central Bank of Nigeria (CBN) offered ₦14.61 billion across three tenors (91-day, 182-day and 362-day bills), receiving ample bids that reached ₦89.01 billion.

Nonetheless, the CBN only sold ₦14.61 billion to investors, which is the same as initial offer.

Average stop rate fell by 21 bps to 2.53% at the auction from 2.74% with rates declining across tenors: 91-day to 1.80% from 2.00%, 182-day to 2.04% from 2.20%, and 364-day to 3.75% from 4.02%.

For the bond auction, the DMO offered N150 billion split across 5-year, 15-year and 30-year.

Based on the auction result, total subscription was robust at ₦545.17 billion with bid-offer multiple of 3.6x.

However, the Debt Management Office (DMO) allotted only ₦100 billion.

Allotment & marginal rates across tenors were 5-year at 8.00% from 9.20% previously – offer was ₦40 billion and subscription ₦137.65 billion while allotment was ₦32.99 billion.

However, 15-year was offered at 11% from 11.70% previously with total offer of ₦50 billion, but subscription was ₦123.56 billion while allotment was ₦16.22 billion.

Also, 30-year was offered at 12.15% from 12.60% previously with total offer of ₦60 billion, as against subscription of ₦283.95 billion while allotment of ₦50.79 billion was made.

Chapel Hill Denham explained that average marginal rate declined by 78 bps to 10.38% from 11.17% previously.

Earlier on Wednesday, the NBS published May 2020 Consumer Price Index (CPI) report, which showed headline inflation rate printed higher,

It surged by 6 bps to 12.40% (from 12.34% in April 2020), driven by broad-based pressure on the core and food baskets.

“The out turn was fully in line with our forecast, but above Bloomberg consensus estimate of 12.30%”, Chapel Hill Denham stated.

The investment firm stated that it outlook for inflation remains biased to the upside, as analysts envisage further pressures in the food and core divisions in the second half of 2020 estimates.

“We are tracking June inflation rate at 12.45%, and maintain our year-end forecast at 13.5% year on year”, Chapel Hill Denham stated.


The USD/NGN remained unchanged across all market segments. The naira was at ₦361.00, ₦386.00 and ₦452.00 at the official, Importers & Exporters Window and parallel market segments, respectively.

The external reserves stood at US$36.33 billion, declined 0.71% month to date (MTD) as at 16 June 2020.

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Fixed Income Market Records Mix Performance amid Rising Inflation Concern.



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