The Nigeria Bond Watch - Review and Outlook @070416


Monday, July 04, 2016 10: 40 AM/ DLM Research

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During the week under review, major themes that influenced the domestic fixed income market were: 1) The release of FGN bond issuance calendar for 3rd quarter of 2016 by the DMO 2) OMO bills redemption by the CBN; and 3) The statutory inflow from FAAC.

The DMO released the FGN bond issuance calendar for 3rd quarter of 2016 which states that between N305.00billion to N395.00billion worth of FGN bonds will be issued: (5Year: N105.00 - N135.00billion; 10Year: N95.00 - N125.00billion and 20Year: N105.00 - N135.00billion). The average of total expected issuance at N350.00billion is 132% and 220% higher than volumes issued in preceding quarter (N264.50billion) and corresponding quarter in 2015 (N159.00billion) respectively. The anticipated increase in borrowing further iterate government intention to finance most of its budgetary obligations via increase in both domestic and external debt as stated during the budget presentation of the present administration.

The domestic fixed income market opened on a quiet note at the beginning of last week but became bullish from the mid to the end of the week due to elevated system liquidity via inflows from statutory FAAC allocation (c.N148.00billion) and OMO bills redemption (N155.03billion). Consequently, yields declined by an average of 116 basis points across the curve on a week on week comparism.

In the week ahead, the DMO is expected to offer N44.00billion Treasury bills – (91day: N19.00billion and 182day: N25.00billion). Also, we expect redemption of treasury bills worth N44.00billion. Given prevailing system liquidity, buying sentiments may prevail this week as the market anticipates foreign portfolio inflows whilst taking positions ahead of the auction.

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