Yields on short-dated Nigerian debt seen higher

JOHANNESBURG: Nigerian Treasury bill yields are expected to rise next week as the central bank tightens liquidity to bolster the naira. In Kenya, T-bill yields are set to fall in line with slowing inflation. NIGERIA

Yields on short-dated Nigerian fixed-income assets are seen inching up next week as the central banks tightens liquidity to shore up the naira.

The currency of Africa's top crude-oil producer has been under pressure following last week's suspension of central bank governor Lamido Sanusi. Offshore investors sold Nigerian debt and equities. Dealers said the central bank has issued around 130 billion naira ($787 million) in OMO (open market operations) securities on Thursday and Friday to further tighten liquidity, using higher yields to attract demand.

"Yields on OMO bills have gone up to around 13.1 percent from 12 percent previously as the central bank increased the frequency of Treasury bill sales to mop up liquidity from the market," a trader with the United Bank for Africa said.

On the other hand, bond yields are seen inching lower next week on renewed buying from local pension funds.

The yield on the 7-year bond fell to 13.89 percent on Friday, down 86 basis points from a week ago. Three-year paper was trading around 13.83 percent from 13.9 percent.

KENYA

Yields on Kenyan Treasury bills on sale next week are expected to ease, driven by increased subscription rates and slowing inflation. The central bank will sell 9 billion shillings ($104 million) of 91-day, 182-day and 364-day Treasury bills at auctions next week. At this week's sales, the weighted average yield on 91-day paper rose to 9.19 percent from 9.12 percent a week earlier.

The yield on the 182-day Treasury bill edged up two basis points to 10.35 percent. Yield on the one-year instrument declined four basis points to 10.61 percent.

Traders said the large amount of securities maturing meant there will be increased liquidity in the markets, which will lead to more aggressive bidding at the auction.

"I think maturities are 16 billion shillings and they are only looking for 9 billion. I think we will see more demand thanks to what is being offered," Ignatius Chicha, head of trading at Citibank Kenya, said.

"And also the fact that inflation came in lower, I think we will see the rates will come off slightly.

I think the rates will still stay roughly around 9 to 10 percent." Kenya's year-on-year inflation rate slowed to 6.86 percent in February from 7.21 percent in January, the statistics office said on Friday.