Tight liquidity to buoy Nigerian bond yields

Nigerian bond yields are seen slightly higher at the primary auction next week amid tight liquidity in the Africa's top economy banking system after central bank directed commercial banks to pay for their dollar purchases 48 hours in advance.
Traders said tight liquidity is forcing some banks to sell-off their bond holdings to make provision for dollar purchases at the central bank's forex intervention, pushing up yields at the secondary market.
"Many investors are cutting short their long positions in the market cash shortage and this has push yields up above the 15 percent level," one dealer said.
Nigeria plans to issue 70 billion naira ($350 million) worth of Treasury bonds with maturities ranging between five and 20 years at an auction next week.
Traders said they expect a returns of around 15.50 percent at the auction in tandem with the range at the secondary market.
Nigeria's central bank has directed commercial banks to pay for their dollar purchases 48 hours in advance, after banning them from accepting foreign currency cash deposits to curb dollar demand and stem illicit financial flows.
The resultant cash shortage has pushed up interest rates on the interbank market, with overnight rate at 100 percent at 1020GMT.
Yields rose sharply on the longest tenor 2034 debt, up to 15.12 percent from 14.32 percent last week.
The benchmark 2024 paper rose to 15.31 percent against 14.85 percent, while the 2022 debt was trading around 15.37 percent from 14.80 percent.