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The Nigeria Bond watch - Review and Outlook @082216

Bonds
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Monday, August 22, 2016 12:59pm /DLM Research

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ANALYSIS

During the week under review, activities in the domestic fixed income market were influenced by: 1) The August 2016 FGN bond auction by the DMO; 2) Treasury and OMO bills auction and redemption by the CBN.

At the monthly FGN bond auction, N40.00billion, N30.00billion and N40.00billion worth of 14.50% FEB 2021 (5yr), 12.50% FGN JAN 2026 (10yr) and 12.40% FGN MAR 2036 (20yr) were offered and re-opened at marginal rates of 15.08%, 15.28% and 15.53% for 5year, 10year and 20year respectively. The DMO also allotted N109.59billion of the 5-Yr benchmark on a non-competitive basis. Subscription stood at N210.29billion, 191% of amount offered.

At the treasury bills auction, N32.44billion and N30.00billion of 91day and 182day were offered and sold at marginal rates of 14.99% and 17.48% respectively.

At the OMO auctions, the CBN offered N200.00billion OMO bills with tenors ranging between 191day to 315day but sold N441.17billion at marginal rates ranging between 18.00% and 18.50%. Subscription stood at N709.45billion, 355% of amount offered.

In our opinion, the high subscriptions at the auctions are indicative of existing system liquidity and inflow of c.N118.40billion from OMO bills redemption.

The domestic fixed income market was mainly bullish last week as unmet demands at the Treasury bills and bond auctions hit the OTC market and consequently resulted to increased buying activities. As a result, yields declined by an average of 63 basis points on a week on week comparism.

In the week ahead, the market may experience more selling activities as interbank liquidity gradually thins out, barring any inflow into the system.

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