The Nigeria Bond Watch - Review and Outlook @120715

Proshare

Monday, December 7 2015 3: 17 PM/ DLM Research

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ANALYSIS

During the review week, market activities were influenced by: 1) the release of December 2015 FGN bond offer circular by the DMO; 2) Treasury and OMO bills auctions; and 3) inflows from statutory allocation from FAAC and redemption by the CBN.

At the treasury bills auction, N17.85billion, N18.00billion and N93.33billion of 91day, 182day and 364day benchmarks were offered whilst N57.85billion, N18.00billion and N53.33billion were sold at marginal rates of 5.61%, 7.00% and 8.00%, against last auction stop rates at 5.34%, 7.25% and 8.50% respectively. Subscription level stood at N407.55billion (315% of volume offered).

At the OMO auction, the CBN offered N50.00billion of a 296day bill but sold N47.70billion at marginal rate of 8.00%. Subscription level stood at N186.76billion (373% of volume offered). The high subscription level at the auctions was indicative of elevated system liquidity due to inflows from treasury bills redemption (N129.18billion) and FAAC allocations (c.N220.00billion).

The domestic fixed income market experienced mixed reactions as profit-taking activities dominated most trading sessions last week whilst selling activities outweighed the buy side. As a result, yields rose by an average of 162 points week-on-week basis.

The DMO is expected to re-open N30.00billion and N20.00billion worth of 15.54% FEB 2020 (5yr) and 14.20% MAR 2024 (10yr) respectively at this week’s FGN bond auction. Also expected is the redemption of OMO bills worth c.N193.98billion. The market may fall back to the bullish terrain this week on the back of further elevation in system liquidity whilst the CBN is expected to mop the excess liquidity via OMO auctions.

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