The Debt Management Office (DMO) will on Wednesday auction federal government bonds valued at N75 billion.
A breakdown of the debt instruments, which are all reopening, showed it comprises of 20-year, 10% FGN Jul 2030 paper worth N35 billion and a three-year, 13.05% FGN Aug 2016 debt worth N40 billion.
The settlement date for the instrument is Friday and it is N1, 000 per unit, subject to a minimum subscription of N10, 000 and in multiples of N1, 000 thereafter.
“For re-openings of previously issued bonds, (where the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus accrued interest from the original issue date.
“FGN bonds are backed by the full faith and credit of the federal government of Nigeria and are charged upon the general assets of Nigeria,” DMO explained.
Analysts at Cowry Assets Management Limited predicted that the respective marginal rates of the debt instruments to be auctioned would moderate given the declining inflationary trend in 2013, the few alternative investment outlets for the Pension Funds Administrators as well as the sustained demand for FGN bonds by foreign portfolio investors.
Meanwhile, bond prices increased for most maturities last week, on the back of buy pressure. On a week-to-date basis, the 20-year, 10% FGN Jul 2030 bond appreciated by 22 kobo (yield fell 12.95 per cent from 12.99 per cent); the 10-year, 16.39% FGN Jan 2022 paper gained 12 kobo (yield softened to 12.75 per cent from 12.77 per cent); the 7-year 16% FGN Jun 2019 debt firmed by 13 kobo (yield moderated to 12.74 per cent from 12.77 per cent); while the 5-year, 4% FGN Apr 2015 instrument strengthened by 28 kobo (yield declined to 12.91 per cent from 13.05 per cent).
NIBOR and Money Market Activities
The Nigerian Interbank Offered Rates (NIBOR) climbed to an average of 12.28 per cent on Friday, compared to the 11.64 per cent it attained the preceding Friday.
This was as a result of the use of some monetary policy weapons by the Central Bank of Nigeria (CBN), in line with its objective of curtailing money supply in the system.
The CBN issued treasury bills via the primary market auction (PMA), to raise credit on behalf of the government and also deployed its monetary tightening weapon, the open market operations (OMO), to soak up liquidity in the market. It sold a total of N324.29 billion worth of treasury bills via the primary market auction and OMO.
At the primary market, the CBN sold 91-day bills worth N22.97 billion; 182-day bills worth N30 billion; and 364-day bills worth N71.33 billion. Other treasury bills sold included 52-day bills worth N30 billion; 101-day bills worth N30 billion; 111-day bills worth N30 billion; 114-day bills worth N30 billion.
The instrument sold more than counteracted matured bills worth N241.75 billion. This included 91-day bills worth N22.97 billion; 182-day bills worth N30 billion; 195-day bills worth N131.96 billion; and 396-day bills worth N56.82 billion.
The outflow exceeded the inflows, thereby leading to an increase in NIBOR across all tenors.
For instance, data obtained from the FMDQ OTC showed that while the Call tenor climbed to 11 per cent on Friday, from 10.54 per cent the preceding Friday; the 7-day tenor jumped to 11.50 per cent, from 10.96 per cent the preceding Friday.
In the same vein, just as the 30-day tenor advanced to 12 per cent on Friday, from 11.37 per cent the preceding Friday, the 60-day tenor also increased to 12.37 per cent, from 11.72 per cent. Similarly, the 90-day, 180-day and 365-day tenors all closed higher at 12.67 per cent, 13.04 per cent and 13.37 per cent respectively.
This week, treasury bills worth N270 billion would mature on Thursday. The maturing instruments would consist of 226-day bills worth N132.80 billion; 227-day bills worth N26.57 billion; and 231-day bills worth N110.74 billion.
“With these maturities, we anticipate total inflow to exceed outflows; hence we predict moderation in interbank rates,” Cowry Assets Management stated in a report at the weekend.
However, some traders also revealed that the central bank withdraw some amount money from banks last week to meet its cash reserve requirement (CRR) rules.
The central bank had hiked the CRR on public sector deposits to 50 per cent, from 12 per cent in July.
The open buy back rose to 10.58 per cent on Friday, compared with the 10.33 per cent the preceding week, 1.42 per cent points below the central bank’s benchmark interest rate of 12 per cent. Also, the overnight placement closed at 10.92 per cent, against 10.54 per cent it stood the preceding Friday.
Also, the FMDQ data showed that while the one-month tenor of the Nigerian Interbank Treasury Bills True Yield (NITTY) closed at 10.71 per cent; the two-month tenor at 11.65 per cent; the three-month at 12.23 per cent; the six month at 12.29 per cent; the nine-month at 12.69 per cent, the 12-month tenor of the NITTY also closed at 13.03 per cent.
Forex Market
The naira depreciated against the dollar at the official window and the bureau de change (BDC) segments last week amid high for the greenback. The CBN sold $598.09 million at its bi-weekly regulated Retail Dutch Auction System (RDAS), out of the $600 million offered. The amount sold was slightly lower than the $599.94 million sold the preceding week. But the naira depreciated slightly at the RDAS to N155.72 to a dollar. The nation’s currency also depreciated at the BDC to N172 to a dollar.
However, the naira appreciated at the interbank arm of the market by six kobo to close at N158.54 to a dollar due to improved dollar sales at that segment of the market.
“This week, we anticipate some respite for the local currency in the parallel market as cash inflows from Diaspora Nigerians returning for Christmas holidays enhance supply in that market. “We also presage a moderation in demand at both the CBN’s RDAS and interbank markets as importers begin to wind down their business ahead of the yuletide break,” the Cowry Assets Management report predicted.
Source: Thisday (by Obinna Chima)
