UBA’s Bankole Odusanya breaks down Nigeria’s bond auction

United Bank for Africa's Head of Fixed Income Trading, Bankole Odusanya, recently joined CNBC Africa to discuss the response of investors to Nigeria's bond auction conducted by the Debt Management Office. Before delving into the details of the bond auction, Odusanya provided insights on the recent NPC meeting, highlighting the market's anticipation and pricing in of the retention of monetary policy rates and stance by the Monetary Policy Committee. The proactive measures taken by the Central Bank to address pressure on foreign exchange, such as tightening on the local currency end through policies like CRR and LDR adjustments, were viewed as crucial steps to manage the economic situation. While some analysts had differing expectations, the market largely accepted the decisions made by the CBN to balance credit availability and cost in critical sectors of the economy. Turning to the bond auction, Odusanya shared that while the results were pending, the market anticipated rates to range between 10-12% for the short-term bond and 12-14% for the longer tenors, reflecting investors' cautious approach amidst global economic uncertainties. Despite challenges posed by the pandemic and capital outflows from emerging markets, the Nigerian bond market continued to attract interest, especially in short-term securities, emphasizing the need for high yields to mitigate risks. Odusanya emphasized the prevailing bearish trend in the market due to the risk-on sentiment among foreign portfolio investors, leading to higher demand for short-term treasuries and bonds. As the market navigates through the uncertainties caused by COVID-19, the focus remains on managing risks and maintaining liquidity in the local currency asset space.