African currencies week ahead: primary auction to push Nigeria bond yields up

Nigerian bond yields could rise as investors sell off their holdings to take part in a primary auction, while Kenyan Treasury bill yields should continue tracking rising overnight interbank lending rates.
NIGERIA Nigerian bond yields could rise next week ahead of a primary auction August 12 with some investors expected to sell-off their holdings hoping to lock in better returns at the new bond sale.
The debt office is yet to release details of the auction, but traders said investors usually sell-off their holdings a week before to position for fresh bids at the primary market.
Nigeria sold bonds worth 44 billion naira ($221 million) at last month auction, short of the target of 70 billion naira initially set by the debt office. "Interest in the local bond has slowed down and this has fuelled sell-off across the curve in recent times," one dealer said. "Banks are no longer willing to hold long positions in the market." Yields fell marginally on the longest tenor 2034 debt, down to 14.32 percent on Friday from 14.36 percent last week. The benchmark 2024 paper rose slightly to 14.85 percent against 14.82 percent, while the 2022 debt rose to 14.80 percent from 14.79 percent.
KENYA A steep rise in overnight interbank lending rates and the central bank's high-yielding term auction deposits (TAD) are expected to be matched by yields on Kenya's Treasury bills. The central bank has capped the weighted average yield on its 14-day, 21-day and 28-day term auction deposits - used to manage liquidity in the money markets - at 14 percent. "In terms of T-bills, the yields will keep on moving up ... and they will try to get to where TAD cap is at," said Mathangani Kariuki, a fixed income analyst at Kestrel Capital.
Kariuki said the yields will also be pushed higher by tight shilling liquidity. The average interbank lending rate rose to its highest level this year on Thursday, rising to 18.4628 percent from 16.3769 percent last Thursday. Next week the central bank will auction 91-day, 182-day and 364-day Treasury bills worth a total 11 billion shillings ($108 million).
At this week's sale, the yield on the 91-day bill rose to 11.539 percent at auction on Thursday from 11.486 percent last week, while that on the 364-day bill rose to 13.500 percent from 13.034 percent last week. The weighted average yield on 182-day Treasury bills fell to 11.929 percent at auction on Wednesday from 12.431 percent last week.