The Nigeria Bond Watch - Review and Outlook @112414

Proshare

Monday, November 24, 2014 12:04 AM/ DLM Research

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ANALYSIS
During the review week, the fixed income market was largely characterized by sustained bearish sentiments as investors’ remained skeptical due to weak economic indices, that is, continuous decline in oil prices and Naira depreciation, which have reduced the attractiveness of the Nigerian investment space. This, alongside issuance of treasury bills and statutory allocation from FAAC influenced market behavior, albeit marginally.

At the treasury bills auction, N40.65billion, N25.00billion and N54.29billion worth of 91day, 182day and 364day worth of bills were offered whilst N32.44billion, N22.82billion and N64.68billion were sold at marginal rates of 9.99%, 10.80% and 12.49%, against 9.70%, 10.50% and 11.20% respectively at the last auction. Total subscription during the auction stood at N165.85billion, 138.28% of total amount sold.

The fixed income space remained bearish as market players stayed on the sell side of the market. Yields moved up across the curve to close at their highest levels since June.

The uncertainty surrounding next week’s MPC meeting coupled with persistent pressure on the currency and falling oil prices have contributed largely to the bearish sentiments in the market. Despite, slight demand from the PFAs and profit-taking activities by traders towards the tail-end of the week, yields gained about 40basis points above where it opened at the beginning of the trading week.

In the week ahead, we expect the redemption of OMO bills worth c.N415.15billion and in view of the anticipated increase in system liquidity; we foresee liquidity tightening by the CBN via OMO auctions. As the market awaits the outcome of the CBN’s MPC meeting slated for 24th & 25th November, 2014 where the Apex bank is expected to make major policy changes to address the current pressure on the local currency, quiet trading session is anticipated for most part of the week.

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