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Analysis 

During the week under review, secondary market activities for FGN bonds were driven by the release of the February 2012 inflation figure by the NBS which stood at 11.90%, down 70bps from 12.60% recorded in the previous month, whilst the MPC retained MPR at 12.00%. Following the CPI data release, market turned bullish across all maturities as investors sought to cover short positions taken during the preceding week amidst expectations that yields are expected to trend southwards in line with easing inflation rate.
 

Following the MPC’s decision to hold MPR at 12.00%, we note the consistent increase in bond prices across all maturities as a result of demand pressures from PFAs and market makers due to the taking of long positions.
 

The treasury bills market witnessed a primary auction during which N37.49 billion worth of 91day bills was sold at the rate of 14.30% against 14.18% at the previous auction, whilst N49.35 billion worth of 182day bills was sold at the rate of 15.00% against 15.49% during the last auction. Total subscription during the auction stood at N326.58 billion versus N328.78 billion at the last auction.
 

Also, we are inclined to highlight that there was an inflow of c. N727 billion from Federal Account Allocation Committee (FAAC) for the month of February during the week. In our view, the increased liquidity within the system led to a significant tightening that occurred towards the end of the week as c. N230.00 billion OMO bills were offered at the two OMO auctions whilst c. N257.18 billion was sold, at discount rates ranging between 15.20% and 15.38% with maturities between 104 and 350 days.
  

In the week ahead, DMO will offer for sale N50 billion worth of 7.00 Oct 23, 2019 and 16.39 Jan 27, 2022 bonds, all issues are reopening. We equally expect the bond market to sustain the current bullish trend given the demand pressure experienced in the review week. Also, there will be a treasury bills auction of about N80 billion by the CBN in 91 and 182day bills, while about N103bn worth of bills will mature.
 

In our opinion, given the enormous demand which has depressed bond yields, we expect yields for the upcoming auction to come out lower than the last auction’s marginal rates.
 

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