The Nigeria Bond Watch - Review and Outlook @090913

Proshare

Monday, September 09, 2013 9:35 AM / DLM Research

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Analysis

During the review week, domestic investors remained active in the market in reaction to current market trend and dynamics. Also experienced was the mid-week treasury bills auction, the release of the September 2013 FGN bonds auction offer circular and OMO bills auction.

 

At the treasury bills auction, N22.97billion worth of 91day bills was offered and sold at the rate of 10.90% against 11.09% at the previous auction, while N40.0billion and N90.0billion worth of 182day and 364day were offered and sold at the rates of 12.34% and 12.59% respectively against 12.25% and 13.08% at the last auctions. Total subscription during the auction stood at N378.24billion versus N147.95billion at the last auctions. In addition, a total of N68.37billion worth of treasury bills across maturities was allotted on a non-competitive basis.

 

At the OMO window, a total of N200.0billion worth of bills with tenors ranging between 122days to 182days were offered, while c.N121.72billion were sold at a marginal rate of 12.75%. We however observed the low subscription levels recorded during the auction which resulted in non-sale of a particular security (122days) as it had a very low subscription i.e. N7.38billion against N60billion offered. This explains the fact that the system is not very liquid irrespective of maturing OMO bills.

 

In the over-the-counter (OTC) market, we observed that demand remained marginal – similar to previous week’s levels - as domestic pension funds sought to cover up their positions in view of the overall direction of the market. We however believe that this trend was sustained on the back of overall activities of the review week and expectation of the upcoming primary auction (FGNs) in the week ahead given the tight liquidity situation and the fact that the bonds to be reopened are not actively trading. Therefore, we expect the market to remain at this level in the absence of any significant demand.

 

At this week’s FGN bond auction, N35.0billion worth of bonds –i.e. 13.05 August 16, 2016 (N25.0billion) and 10.00 July 23, 2030 (N35.0billion) will be issued. We equally expect N145.43billion OMO bills to mature during the week.

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