The Nigeria Bond Watch - Review and Outlook @011116

Proshare

Monday, January 11 2016 10: 45 AM/ DLM Research

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A
NALYSIS

As trading sessions resumed for the year, activities during the review period were influenced by the Treasury bills auction by the Debt Management Office (DMO) and OMO bills auctions and redemption by the CBN – which influenced liquidity levels and affected market behavior.

At the treasury bills auction, a total of N136.25billion T.bills was offered – N25.40billion (91day), N25.00billion (182day) and N85.85billion (364day) whilst N55.40billion, N25.00billion and N55.85billion were sold at marginal rates of 4.00%, 6.99% and 8.05% against 9.00%, 6.19% and 7.45% for 91day, 182day and 364day respectively at the previous auction. Total subscription stood at N311.51billion, 229% of amount offered.

At the OMO auctions, a total of N90.00billion OMO bills with tenors ranging between 205day and 224day was offered whilst N190.07billion were sold at marginal rates ranging between 7.75% and 7.90%. Total subscription stood at N257.17billion, 286% of amount offered. In our opinion, the high subscription was due to elevated system liquidity stemming from treasury bills redemption worth c.N136.25billion.

The fixed income OTC market started the year on a bearish note as selling activities outweighed the buy side, further supported by the CBN’s OMO auctions. As a result, yields rose by an average of 51basis points across all trading benchmarks.

In the week ahead, we expect redemption of OMO bills worth N250.17billion. Given the gradual reduction in system liquidity and barring further OMO auctions from the CBN, the market is expected to remain in the bearish terrain.

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