The Nigeria Bond Watch - Review and Outlook @080315

Proshare

Monday, August  3, 2015 10:11 AM/ DLM Research

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A
NALYSIS

Major drivers of activities in the fixed income market for the review week were 1) OMO bills auctions and redemption by the CBN; 2) inflows from statutory FAAC allocation and CRR Credit – which influenced liquidity levels and affected market behavior.

At the OMO auctions, total of N250.00billion were offered with tenors ranging between 157days and 301days whilst N331.01billion were sold at marginal rates ranging between 13.70% to 14.00%. System liquidity was elevated last week due to inflows from OMO bills redemption (c.N102.67billion), FAAC allocation (c.N270billion) and CRR Credit (c.N2.73billion)

At last week’s trading sessions, the domestic fixed income market experienced mixed reactions as buying pressure dominated the short end of the curve with consequent decrease in yields by 75 basis points whilst the longer end witnessed a rise in yields by 9 basis points as a result of sustained sell off. On a week-on-week comparism, yields declined by an average of 33 basis points across the curve.

In the week ahead, T.bills worth N195.18billion will be offered across maturities (91day-N45.18billion, 182day- N30.00billion and 364day-N120.00billion). We expect redemption of treasury bills worth N150.00billion. Given current market liquidity, the bullish run may be sustained this week whilst the CBN may continue its liquidity tightening via OMO auctions.

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