Nigerian debt yields seen rising on tight liquidity

CBN Gov, Emefiele

Tight liquidity and banks' lack of access to their credit balance at Nigeria's central bank could dampen demand next week at a debt auction where yields are seen climbing marginally higher than at the previous auction.
Technical glitches at the central bank have denied banks' access to their balances with the regulator in the last four weeks, putting most dealers in the dark about the volume of liquidity available in the market to trade with.
Nigeria plans to raise 100 billion naira ($615.12 million) worth in bonds with maturities ranging between 3 years and 20 years at an auction next Wednesday.
At similar auction last month, the 3-year paper fetched 11 percent, 10-year paper attracted 12.19 percent, while the 20-year debt note fetched 12.14 percent.
Traders said they expected yields to inch up slightly to 11.05 percent on the 3-year paper and 12.20 percent on the 10- and 20-year paper due to expected weak demand and a lack of information to trade with.
"Liquidity has not been good, especially with the conduct of Open Market operations (OMO) by the central bank which soaked over 500 billion naira from the market and we expect this to be reflected at the auction next week," said one dealer with Stanbic IBTC.