Monday, June 25, 2012 12:00 PM / DLM Research
 

Analysis

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.

LAST WEEK: The Nigerian Bond Watch @ 180612 – DLM
 

Click Here To Download Full Report
 

Disclaimer/Advice to Readers: While the website is checked for accuracy, we are not liable for any incorrect information included. The details of this publication should not be construed as an investment advice by the author/analyst or the publishers/Proshare. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All opinions on this page/site constitute the authors best estimate judgement as of this date and are subject to change without notice. Investors should see the content of this page as one of the factors to consider in making their investment decision. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions. This article is published with the consent of Dunn Loren Merrifield, the author(s) for circulation to the online investment community in accordance with the terms of usage. Further enquiries should be directed to the author whose e-mail is Dunn Loren Merrifield Limited [Email: todukoya@dunnlorenmerrifield.com] otherwise comments should be sent to info@proshareng.com