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The Nigeria Bond watch – Review and Outlook @080816


Monday, August 08, 2016 10:22am/ DLM Research

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During the review week, the Nigerian fixed income OTC market was influenced by: 1) Treasury and OMO bills auctions and redemption; and 2) CRR debit - by the CBN.

At the treasury bills auction, N45.18billion, N80.00billion and N120.00billion of 91day, 182day and 364day benchmarks were offered and sold at marginal rates of 15.44%, 18.06% and 18.50%, which were higher than 14.14%, 15.49 and 16.48 respectively recorded at the previous auction. Subscription level stood at N491.53billion (200% of volume offered).

At the OMO auction, the CBN offered N100.00billion OMO bill with tenors ranging from 185day to 353day whilst N170.34billion was sold at marginal rates ranging between 18.00% and 18.50% as subscription level stood at N202.20billion (119% of volume offered). Despite the CRR debit of N15.71billion from the system, subscription levels at the auctions were still relatively high due to existing system liquidity and inflows from treasury bills redemption (N245.18billion).

It was a mixed reaction in the fixed income market last week as buoyant system liquidity at the beginning of the week enhanced buying activities across mid to longer tenors. The mop-up action of the CBN via OMO auctions fuelled selling pressure towards the tail end of the week. Over all, yields declined by an average of 28basis points across the curve week-on-week.

We expect the redemption of OMO bills worth c.N113.68billion this week. The market may be predominantly bearish this week as net system liquidity declines to the negative region whilst an OMO auction from the CBN is anticipated.

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