In line with the overall market expectation of a continued uptick in the yield environment, marginal rates across the 2032s, and 2037s climbed c.115bps, and 150bps, to print at 15.0%, and 16.0% respectively, while the marginal rate on the re-issued 2029s printed at 14.5%. We note that investors’ sentiment was significantly weighed down by a blend of the tight system liquidity at the time and the new CBN directive that restricts auction participants from accessing the discount window on settlement dates.

Looking ahead to subsequent auctions, we maintain our expectations for higher rates in the fixed income environment. Our expectations are hinged upon tight liquidity within the bonds market as coupon inflows are expected to be weak (N258.3bn in Q4-22 vs N669.3bn in Q3-22) while stubbornly elevated inflation will likely keep monetary policy aggressive. In addition, we retain expectations of continued reliance on the domestic debt market by the Federal Government which will continue to drive supply of bonds. As a result, we recommend traders and investors continue to short the bonds market while fixed income-obligated managers should continue to hold a bias for short duration bonds