The Nigeria Bond Watch - Review and Outlook @052316

Proshare

Monday, May 23 2016 12: 12 PM/ DLM Research

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ANALYSIS

During the week under review, activities in the domestic fixed income market were influenced by: 1) Treasury bills auction and redemption by the CBN; and 2) The release of April inflation figure (13.70%) by the National Bureau of Statistics (NBS).

At the treasury bills auction, N32.44billion, N22.82billion and N55.68billion of 91day, 182day and 364day benchmarks were offered and sold at marginal rates of 8.10%, 9.20% and 12.48% respectively. Subscription level stood at N216.52billion (195% of volume offered). In our opinion, the high subscriptions at the auctions are indicative of elevated system liquidity from treasury bills redemption worth N110.94billion.

The fixed income market witnessed mixed reactions from the beginning to mid last week as selling pressure on short and mid-tenored maturities forced their yields upwards whilst demand for long tenors led to decline in their yields. The dwindling system liquidity, rise in inflation rate (from 12.80% to 13.70%) and anticipated hike in interest rate at this week’s CBN MPC meeting equally contributed to the selling spree towards the end of last week’s trading sessions. Consequently, week on week, yields rose by an average of 53basis points across the curve.

In the week ahead, we expect redemption of OMO bills worth c.N83.82billion. The market may experience quiet trading sessions this week as dealers take positions and await the outcome of the CBN’s MPC meeting slated for 23rd and 24th May, 2016.

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