During the previous week, secondary market activities were affected by the postponement of the FGN primary market bonds auction and the release of the third quarter 2012 treasury bills issuance calendar. The development led to a relative slowdown of market activities as traders sought to cover their short positions in view of the rescheduled auction, which led to a marginal decline in prices across all tradable maturities.
The FGN primary market bond auction, which was earlier scheduled to take place on Wednesday June 20, 2012, was postponed till Wednesday June 27, 2012. It is expected that a total of N83.91 billion worth of bonds will be issued out of which N30.00 billion each will be 5year and 7year maturities, while N23.91 billion is of 10year maturity. The 7year bond will be a new issue while the 5year and 10year are being re-opened.
The treasury bills issuance calendar for the third quarter shows a proposed total treasury bills issue of circa N841.32 billion against N917.77 billion for the second quarter of 2012. In our analysis, we note the significant increase in the issue of treasury bills since the fourth quarter of 2011 as monetary authorities maintain tight liquidity management on the back of the bi-monthly auctions. (fig.: Tbills quarterly auction, 1Q11 - 3Q12E)
In the sub-sovereign bond market, Fitch Ratings withdrew its expected rating on the Rivers State ’s proposed fixed rate bond. Prior to the withdrawal, the expected ratings of the issuer and bond were B+ and AA- respectively. The bond was scheduled to be issued between the end of 2011 and beginning of 2012. The withdrawal is as a result of the delay in finalizing the transaction documents. Rivers State remains one of Nigeria ’s main oil producing states and collects monthly budgetary allocations of circa N19 billion (US$118million) from the federation account. Beyond this, we observe that no sub-sovereign bond has been concluded in the current fiscal year; in our opinion, the outlook for sub-sovereign issues remains weak in view of the current interest rate regime.
In the week ahead, it is expected that the inflation figure for the month of May will be released by the National Bureau of Statistic (NBS). Also, there will be a treasury bills primary auction during which about N100.62 billion worth of 91day and 182day bills is expected to be issued. We equally expect the maturity of circa N79.19 billion worth of treasury bills and OMO bills worth c. N90.48 billion. Therefore, we anticipate a high level of subscription during the treasury bills auction as a result of the liquidity inflow that will be experienced during the week.
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