The Nigeria Bond Watch - Review and Outlook @040714

Proshare

Monday, April 7, 2014 12:05 AM/ DLM Research

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Analysis

The major highlights of the review week were the persistent issuance of OMO bills by the CBN and an observed increase in interest from domestic investors, especially pension funds Administrators (PFAs).

In line with the prevailing monetary policy stance, consistent liquidity tightening was maintained during the week as a total of N210.0billion worth of OMO bills with tenors ranging between 112days and 136days were offered while a total of N122.40billion was sold at marginal rates ranging from 13.04% to 13.10%; subscription level was N156.14billion. We noted a relatively high level of subscription and low sales during the auction - an indication of the combination of high system liquidity and the CBN’s resolve not to allow rates exceed a 13.10% cap. The latter was highlighted by the fact that there was no sale at one of the auctions that took place during the week. We however note that the reason for the liquidity tightening by the apex bank (CBN) could not be unconnected with OMO bills that matured during the week.

 

 

At the OTC market, there was an increase in interest in FGN bonds, which accounted for a marginal increase in the yields of tradable bonds. Meanwhile, the subsequent sell-off seen during the week wasn’t strong enough to reverse this trend. In our view, this trend may persist in the next couple of days in the absence of any major event capable of significantly affecting the market.

 

In the week ahead, we expect that treasury bills worth c.N183.65billion will be offered; we expect bids to range between 11.80% - 12.10% for the 91days bill and 12.95% - 13.35% for the 182days and 364days bills.  Also expected is the treasury and OMO bills maturity worth c.N183.65billion and c.N357.47billion respectively. Therefore, we anticipate that system liquidity will remain elevated and sustained liquidity tightening by the CBN.

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