The Nigeria Bond Watch - Review and Outlook @101915


Monday, October 19 2015 12: 24 PM/ DLM Research

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Activities in the fixed income OTC market during the review week was influenced by 1) the October 2015 FGN bond auction held by the Debt Management Office (DMO); 2) the release of September inflation figures (headline: 9.40%); 3) redemption of OMO bills – which elevated liquidity levels and affected market behavior.

At the monthly FGN bond auction, two benchmark bonds were re-opened i.e. the 15.54% FEB 2020 (5yr) and 14.20% MAR 2024 (10yr). N80.00billion was offered and sold – N40.00billion (5yr) FGNs and N40.00billion (10yr) FGNs at marginal rates of 13.11% and 13.87% against 15.95% and 15.97% for 5year and 10year respectively at the previous auction. Total subscription stood at N184.88billion, 231% of amount offered. In our opinion, the high subscription was due to elevated system liquidity stemming from OMO bills redemption worth N283.66billion

Buying activities intensified last week in the domestic fixed income market on the back of subsisting system liquidity which was further bolstered by OMO bills maturity as no auction was recorded from the CBN. In spite of the CBN’s announcement concerning pending Treasury Single Account (TSA) funding, the buying sentiment continued with resultant decrease in yields by an average of 132 points week-on-week basis.

In the week ahead, the DMO is expected to offer N138.17billion T.bills - (91Day: N36.79billion, 182Day: N35.00billion and 364Day: N66.39billion). We also expect redemption of Treasury bills worth N138.17billion. Given the prevailing system liquidity and barring any OMO auction from the CBN, the market is expected to be bullish whilst market participants take position ahead of the treasury bills auction.

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