The Nigeria Bond Watch - Review and Outlook @031416

Proshare

Monday, March 14 2016 11: 32 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 March 2016 FGN bond offer circular by the DMO; 2) the release T.bills issuance calendar for 2nd quarter, 2016 by the CBN; 3) the release of 4th quarter GDP growth rate (2.11%) by the NBS; 4) OMO bills auction by the CBN.

The CBN released the treasury bills second quarter 2016 issuance calendar, which states treasury bills worth N1.07trillion (91day: N303.78billion; 182day: N169.99billion and 364day: N599.63billion) will be issued. This is 12% lower than preceding quarter (N1.22trillion) but 8% higher corresponding quarter in 2015 (N994.63billion).

At the OMO auction last week, the CBN offered N50.00billion of a 213day OMO bill but sold N160.66billion at marginal rate of 7.75%. Subscription level was N163.66billion which represented 327% of amount offered.

The domestic fixed income market was predominantly bearish last week as selling activities dominated most trading sessions on the back of declining system liquidity further exacerbated by lack of any inflow. Due to the illiquidity, most dealers sold down securities in order to raise cash to meet other due obligations. Consequently, yields rose by an average of 55 points week-on-week basis.

The DMO is expected to re-open N20.00billion and N40.00billion worth of 15.54% FEB 2020 (5yr) and 12.50% JAN 2026 (10yr) respectively whilst issuing N40.00billion of a new 20yr bond (FGN MAR 2036) at this week’s FGN bond auction. At the treasury bills auction, N166.60billion (91day: N60.00billion, 182day: N23.55billion and 364day: N83.05billion) treasury bills will be issued. Also expected is the redemption of treasury and OMO bills worth N164.66billion and c.N172.83billion respectively. The bearish bias may continue this week as market players take positions ahead of the auctions, barring any OMO auction(s) from the CBN. 

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The Nigeria Bond Watch - Review and Outlook @030716


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