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The Nigeria Bond watch - Review and Outlook @081516

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Monday, August 15, 2016 12:29pm /DLM Research

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ANALYSIS

During the review week, the Nigerian fixed income OTC market was influenced by: 1) the release of August 2016 FGN bond offer circular by the DMO; 2) OMO bills auctions and redemption - by the CBN.

At the OMO auctions, the CBN offered OMO bills worth N100.00billion with tenors ranging between 188day and 285day but sold N256.41billion at marginal rate of 18.00%. Subscription levels stood at N341.11billion (341%) of total volume offered. In our opinion, the high subscription was due to buoyant liquidity in addition to inflow of N113.68billion recorded from OMO bills redemption.


It was a mixed reaction in the fixed income market last week as buoyant system liquidity enhanced buying activities of mostly short and long tenors whilst mid-tenored maturities witnessed mild sell-off. Consequently, yields declined marginally by an average of 7basis points across the curve on a week-on-week comparism.


The DMO is expected to re-open N40.00billion, N30.00billion and N40.00billion worth of 14.50% JUL 2021 (5yr), 12.50% JAN 2026 (10yr) and 12.40% FGN MAR 2036 (20yr) respectively at this week’s FGN bond auction. Also, treasury bills worth N62.44billion will be offered (91day: N32.44billion and 182day: N30.00billion whilst anticipating the redemption of treasury and OMO bills worth N62.44billion and c.N118.10billion respectively. Barring any OMO auction from the CBN, the market may continue its bullish trend this week with continuous downwards movement in yields as system liquidity soars and dealers take positions ahead of the auctions.


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