Nigeria bond yields set to decline at auction

 Nigerian bond yields are likely to fall at an auction next week on strong local investor demand, while a liquidity squeeze in Kenya is expected to keep Treasury bill yields high.

CBN Gov, Sanusi

   
   NIGERIA
   Yields on Nigerian bonds are expected to drop at an auction next week in line with prevailing rates on the secondary market amid demand from local fund managers ahead of their financial year-end.
   Nigeria's Debt Management Office will sell 65 billion naira ($410.09 million) in 3- and 20-year maturities on Nov. 13.
   Traders said healthy demand at next week's auction should push yields lower to around 12.5 percent and 12.95 percent respectively on the two instruments.
   At the last auction the 3-year paper was sold at 13.04 percent, 46 basis points lower than the 13.5 percent at the previous sale, while the 20-year bond yielded 13.26 percent, down 43 basis.
   "More local fund managers are willing to rev up their demand at the auction next week, which will result in lower returns on the paper," one dealer said.
   Yields were mixed on the secondary market this week. The June 2022 bond was trading at 12.53 percent on Friday compared with 12.31 percent last week, the April 2017 paper was at 12.4 percent, from 12.43 percent, and the June 2019 paper was at 12.5 percent from 12.43 percent.
   
   KENYA
   Yields on Kenyan government securities are expected to remain elevated next week due to a liquidity squeeze that has pushed up short-term rates.
   The central bank will offer a total of 7 billion shillings ($81.75 million) in 91-, 182- and 364-day Treasury bills in two auctions slated for Wednesday and Thursday.
   The yield on the 3-month paper edged up to 9.999 percent at this week's auction. That on the 6-month instrument rose to 10.559 percent while the 1-year note yielded 10.994 percent.
   "The money markets remain tight so there isn't a strong case for Treasury bill yields until the end of November," said Alex Muiruri, a trader at African Alliance Investment bank.
   The weighted average interest rate in the overnight borrowing market rose to 12.70 percent on Thursday from 12.36 percent in the previous session, prompting the central bank to inject 8 billion shillings through reverse repurchase agreements.
   Traders attributed the acute liquidity squeeze in the money markets to the annual payment of tea farmers for their crop.