Monday, July 2, 2012 10:00 AM / DLM Research

Analysis

During the week under review, secondary market activities for fixed income securities were influenced by the monthly and bi-monthly bonds and treasury bills auctions. At the midweek bond auction, three bonds were offered i.e. the 15.10 April 27, 2017 (N30.00bn), 16.00 June 29, 2019 (N30.00bn) and 16.39 January 27, 2022 (N23.91bn), and issued at marginal rates of 15.86%, 16.00% and 16.21% respectively (fig. 2) The 16.00 June 29, 2019 is a new issue with a 7-year tenor and coupon of 16.00%, whilst the other two securities were reopened.

In addition to the amount offered, we observed that N20.00 billion and N28.70 billion worth of bonds were allotted on non-competitive basis with respect to the 7-year and 10-year instruments respectively. We equally noted the sustained high subscription levels recorded at the last auction, which has characterized the FGN bond auctions in recent months. Meanwhile, over-the-counter (OTC) trading remained relatively active as yields moved northward in reaction to high money market rates and in anticipation of high marginal rates at the last bond auction.  

Over the last month, there has been an observed increase in yields (fig. 3) against the backdrop of uncertainties in the domestic and global financial markets ranging from the crises in the euro area and the slow recovery of the global economy to the pressure on the domestic currency, falling price of crude oil and the next line of action to be taken by monetary authorities with respect to the current trend.  

Meanwhile, during the treasury bills primary auction, N21.84 billion worth of 91day bills was offered and sold at the rate of 14.09% against 14.05% at the previous auction, whilst N52.73 billion and N60.00 billion worth of 182day and 364day bills were offered and sold at the rates of 15.31% and 15.60% respectively against 15.32% and 15.70% during the last auction. Total subscription during the auction stood at N307.89 billion. Additionally, a total of N35.78 billion worth of treasury bills across all maturities were allotted on non-competitive basis.  

In the week ahead, considering the present market condition, we expect the market to be stable while there will be a maturity of c. N23.00 billion worth of OMO bills.

LAST WEEK: The Nigerian Bond Watch @ 250612 – DLM

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