During the review week, 91-day treasury bills worth N32.49 billion were offered and sold at the rate of 14.05 percent compared to N32.97 billion sold at 14.10 percent at the previous auction, whilst N63.14 billion worth of 182-day bills were offered and sold at 15.32 percent compared to 14.94 percent at the previous auction; we note the marginal change in the stop rates of the offered securities as investors continue to maximize returns on the back of the current interest rate regime.
Meanwhile, OTC trading on FGN bonds remained relatively flat as yield movements during the week was insignificant which could be noticed in the quoted prices during the week irrespective of the release of May 2012 inflation figures; we believe the lukewarm state of the market is as a result of traders’ positioning ahead of the primary auction of FGN bonds due to take place in the week ahead. However, there was significant movement at the short end of the curve given the higher level of activity recorded in treasury bills.
We are inclined to note the sustained pressure on the naira after fluctuations recorded as a result of the sale of circa $400million by the NNPC earlier in the week; the continued pressure could be attributed to the high demand by banks and exporters in order to cover their short positions. We believe the immediate high demand will result in continued pressure on the domestic currency.
In the week ahead, we expect the auction of N83.91 billion FGN bonds and N134.57 billion treasury bills. We equally anticipate the maturity of treasury bills worth circa N114.57 billion and the inflow of circa N240.00 billion of budgetary allocations. Consequently, we would expect to see liquidity tightening via open market operations in the days ahead given the significant increase in liquidity expected during the week.
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