The Nigeria Bond Watch - Review and Outlook @020916

Proshare

Tuesday, February 09 2016 8: 12 AM/ DLM Research

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ANALYSIS
During the review week, the Nigerian fixed income OTC market was influenced by: 1) the release of February 2016 FGN bond offer circular by the DMO; and 2) Treasury and OMO bills auctions by the CBN.

At the treasury bills auction, N45.18billion, N80.00billion and N117.22billion of 91day, 182day and 364day benchmarks were offered and sold at marginal rates of 4.95%, 7.98% and 9.49%, against last auction stop rates at 4.29%, 7.59% and 9.33% respectively. Subscription level stood at N400.84billion (165% of volume offered).

At the OMO auction, the CBN offered N50.00billion of a 192day bill but sold N113.68billion at marginal rate of 7.80%. Subscription level stood at N116.68billion (233% of volume offered). The high subscription level at the auctions was indicative of existing system liquidity and inflows from treasury bills redemption (N192.40billion).

The domestic fixed income market traded on a quiet note last week as selling activities dominated most trading sessions whilst slight demand was seen at the short end of the curve. As a result, yields rose by an average of 20 points week-on-week basis.

The DMO is expected to re-open N40.00billion and N50.00billion worth of 15.54% FEB 2020 (5yr) and 12.50% JAN 2026 (10yr) respectively at this week’s FGN bond auction. Also expected is the redemption of OMO bills worth c.N234.45billion. The bearish bias may continue this week as market players take positions ahead of the auction whilst the CBN is expected to mop up anticipated increase in system liquidity via OMO auctions.

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