The Nigeria Bond Watch - Review and Outlook @071116


Monday, July 11, 2016 11: 40 AM/ DLM Research

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During the review week, the Nigerian fixed income OTC market was influenced by: 1) the release of July 2016 FGN bond offer circular by the DMO; 2) Treasury bills auction and redemption; 3) Inflation expectation.

At the treasury bills auction, N19.00billion, N25.00billion and N50.00billion of 91day, 182day and 364day benchmarks were offered whilst N28.00billion, N42.00billion and N120.00biliion were sold at marginal rates of 9.98%, 12.24% and 14.99%, compared with 9.99%, 12.30% and 14.99% respectively recorded at the previous auction. Subscription level stood at N224.27billion (239% of volume offered).

The fixed income market was majorly quiet last week as most trading sessions tilted towards the sell side whilst thinning system liquidity and outlook in anticipation of a relatively higher June inflation rate further enhanced the selling pressure of mostly mid and longer tenors. Consequently, yields rose by an average of 67basis points across the curve week-on-week.

The DMO is expected to issue N40.00billion of a new 5yr tenor and re-open N40.00billion and N40.00billion worth of 12.50% JAN 2026 (10yr) and 12.40% FGN MAR 2036 (20yr) respectively at this week’s FGN bond auction. Also expected is the redemption of OMO bills worth c.N73.27billion. The market may be predominantly bearish this week as system liquidity declines whilst dealers take positions ahead of the auction.

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