During the week under review, activities in the bond market were driven largely by speculative trading in anticipation of key economic events in the week ahead. This resulted in relative sustained intraday volatility and subsequent stability as traders adopted a cautious approach. Earlier in the week, yields of the 10.00 Jul 23, 2030and 10.70 May 30, 2018 moved up slightly whilst that of 4.00 Apr 23, 2015 declined; however, the market was more stable in the latter part of the week. In our opinion, this trend suggests traders’ speculative positions in view of the expected outcome of the Monetary Policy Committee (MPC) meeting and the release of the February 2012 inflation figure by the National Bureau of Statistics (NBS) in the week ahead.
Meanwhile, March 30, 2012 has been fixed for the full call of the 9.75 Mar 30, 2017 First Bank Plc euro bond. As we have highlighted in the past, the fixing of this call date led to the negative yield on the bond. (fig. 3)
In the sub-sovereign bond market, the Ondo state government has successfully raised N27.00 billion from the bond market. The bond which was issued at a fixed coupon of 15.50% has a tenor of seven years, with amortisation structure of an initial two years moratorium period and a call option. The bond is rated “A” (Agusto) and “A-” (GCR). In view of this, the total volume of outstanding state bonds is currently c. N367.50 billion.
The treasury bills market was very active during the week, particularly at longer end, as there was high demand for the 07-03-2013 (364day) and 21-06-2012 (91day) bills. In addition, we note that the CBN intends to issue c. N917.77 billion during the second quarter against N960.13 billion out of which shown on the first quarter calendar. The current amount of Tbills issued so far in 2012 is c. N621.89 billion. This shows a slight decrease of 4.41% in the proposed volume to be issued in the second quarter when compared with that of the first quarter.
In the week ahead, we expect the monetary authorities to hold the benchmark rate stable at the least whilst we anticipate a moderate increase in year-on-year inflation. Also, there will be a treasury bill auction of c. N101.23 billion 91day and 182day tenors.
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