Interest Rate Outlook: MPR on hold but real yields turning positive

With CPI easing and MPR steady at 27.50%, real policy rates have crossed into positive territory for the first time since 2022. Curve steepening looks likely into Q4.

Real MPR is now +35bps on May headline inflation. T-bill stop rates have eased 80-120bps across tenors in the last four auctions; bond yields have compressed at the long end as PFAs extend duration.

We expect: (i) one 25-50bp MPR cut window in Q4 if disinflation holds; (ii) continued bull-flattening in OMO; (iii) corporate debt issuance window opens for AA-rated names targeting 5-7yr paper.

Source: CBN / DMO