• Monday, March 04, 2024
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CBN to roll over N88.9bn at primary market auction on Wednesday

CBN resumes OMO auction with N150bn offer to investors

The Central Bank of Nigeria (CBN) will on Wednesday roll over a total of N88.9 billion at the primary market auction across the short, medium and long-term maturities.

This will consist of N10 billion for 91-day tenor, N20 billion for 182-day, and N58.9 billion for 364-day tenor maturities.

The expected stop rates for the 91-day tenor maturity are put at between 9.6 and 10 percent, while the previous stop rate stood at 9.6 percent.

For the 182-day tenor maturity, the expected stop rates are between 11.7 and 11.9 percent compared to 11.89 percent previously.

The previous stop rates for 364-day tenor action was 12.02 percent but the expected stop rates are between 11.9 and 12.01 percent.

Analysts at Afrinvest Securities Limited maintain a bullish outlook for the secondary market stemming from the sustained buoyant liquidity levels (N343.9bn positive as at Friday) combined with N88.9 billion worth of T-Bills maturities scheduled to hit the financial system on Thursday and anticipate a resumption of interventions by the apex bank.

“We advise investors to take advantage of the relatively more attractive yields at the longer end of the curve,” the analysts said.

Meanwhile, the Federal Government of Nigeria (FGN) has offered for subscription two Savings Bonds in July, making it the seventh of such offering since the beginning of the year.

FGN Savings Bond is a fixed-income instrument issued monthly to deepen the savings and investment opportunities of the Nigerian populace and diversify funding sources for the government.

The debt instruments comprising two-year and three-year savings bonds will be offered at interest rates of 11.195 percent and 12.195 percent per annum, respectively, according to a notice released by the Debt Management Office (DMO) on Monday.

Compared with other previously issued savings bonds, the interest rates on the two tenors are the lowest so far in 2019, even as headline inflation accelerated the most this year by 11.40 percent in May.

The DMO, which is offering the bonds on behalf of the Federal Government, notes that an auction window for the bond offering would open on Monday, July 1, 2019, and close on Friday, July 5, 2019, while the settlement would be on July 10, 2019.

Interested investors are expected to subscribe for the bonds by sending their applications through any of the 129 stockbroking firms appointed as distribution agents by the debt agency.

The two-year and three-year tenors would have quarterly coupon payment dates of October 10, January 10, April 10 and July 10, while both instruments would mature on July 10, 2021, and 2022, respectively.

The DMO assures that the bonds are backed by the full faith and credit of the Federal Government of Nigeria and charged upon the general assets of the country. It also guaranteed a bullet repayment of the principal on the maturity date.

The bonds are offered at N1,000 per unit subject to a minimum subscription of N5,000 and in multiples of N1,000 thereafter, subject to a maximum subscription of N50 million.

According to the debt office, the bonds would be listed on the Nigerian Stock Exchange, creating an opportunity for investors to sell their bonds before maturity.

With the FGN Savings Bond, low-income earners can save and earn more interest than regular bank savings. The bond is also aimed at enhancing financial inclusion in the country as income earned from it is exempted from taxes.

The Nigerian Treasury Bills last week began on a bullish note as buying interests were witnessed in the medium- to long-tenured bills following robust system liquidity to the tune of N247.3bn as at Monday.

This bullish trend persisted throughout the rest of the week as the CBN remained quiet regarding Open Market Operations (OMO) for the third consecutive week while inflows from maturing T-Bills pushed liquidity levels higher to N548.2 billion positive as at Thursday.

Consequently, yields were further compressed by 0.25 percent Week-on-Week to 12.1 percent from 12.4 percent the previous week. Particularly, strong demand was witnessed in the 03-Oct-19 (-121bps), 30-Apr-20 (-94bps) and 11-Jun-20 (-80bps) bills as average yields on medium to long-dated maturities tightened by 0.4 percent apiece W-o-W.

The overnight inter-bank rates on Monday rose to 8.93 percent from 4.64 percent on Thursday, data from FMDQ show. Similarly, the Open-Buy-Back increased from 4.50 percent on Thursday last week to 8.14 percent on Monday.

At the foreign exchange market, the nation’s currency closed at N360.57k per dollar, gaining N0.31k compared to N360.88k traded on Thursday.

The CBN on Friday, June 28, 2019, injected the sum of $242.04 million into the retail Secondary Market Intervention Sales (SMIS) and CNY 32.3 million in the spot and short-tenored forwards segment of the inter-bank foreign market.

Last week, the bonds market performance remained bullish as renewed buying interest was witnessed across the curve following the bond auction (1.7x oversubscribed) which held on Wednesday. Consequently, average yield declined by 49bps W-o-W from 13.8 percent the prior week to 13.2 percent, with the 2020s and 2021s maturities enjoying the most buying interests.

At the bond auction, the DMO offered a total of N100.0bn across the 5-, 10- and 30-year maturities, and significant demand was witnessed across all tenors as the offer was 1.7x oversubscribed. Furthermore, the long-term offer enjoyed the most buying interest with a bid-to-cover ratio of 2.0x (N60.49bn subscribed vs. N30.0bn offered).

 

HOPE MOSES-ASHIKE & OLUWASEGUN OLAKOYENIKAN