Analysts expect bargain hunting on FGN Eurobonds at international market
by HOPE MOSES-ASHIKE
February 1, 2016 | 10:11 am| | | Start Conversation
Analysts in the financial services, asset and management sector of the Nigerian economy expect another week of bargain hunting on FGN Eurobonds at the international market, as crude oil sustains its price upbeat amid plans by world largest producers to cut supply.
At the international bond market last week, FGN Eurobonds appreciated on renewed investor demand. The 10-year, 6.75 percent FGN JAN 2021 paper rose by $1.42 (yield fell to 7.89%); the 5-year, 5.13 percent FGN JUL 2018 bond rose by $0.85 (yield moderated to 6.59%), while the 10-year, 6.38 percent FGN JUL 2023 bond strengthened by $1.99 (yield softened to 8.12%).
According to a report by Cowry Asset Management Limited, Federal Government bond prices at the over-the-counter market last week declined for all maturities amid restrictive forex policies. Week-on-week, the 20-year, 10 percent FGN JUL 2030 bond declined by N0.27 (yield rose to 11.91%); the 10-year, 16.39 percent FGN JAN 2022 paper dipped by N0.16 (yield advanced to 11.70%); the 7-year, 16 percent FGN JUN 2019 instrument depreciated by N0.39 (yield rose to 10.42%); the 5-year 15.10 percent FGN APR 2017 bond shed N0.46 (yield increased to 9.15%), while the 3-year, 13.05 percent FGN AUG 2016 debt softened by N0.02 (yield climbed to 5.57%).
At the foreign exchange (FX) market this week, the analysts expect further widening between the official and alternative market segments, as scarcity of the greenback bites further.
Last week, the naira witnessed further depreciation relative to the dollar at the alternative market segments amid the bi-monthly Monetary Policy Committee (MPC). With respect to the dollar, the local currency shed 2.36 percent to close at N303/$ (from N296/$) at the Bureau De Change segment, while the naira withered by 3.02 percent at the parallel (or black) market to N307/$ (from N298/$). The CBN clearing rate and interbank rate remained at N197/$ and N199.10/$, respectively.
Meanwhile, during the week, the MPC announced that it was “fine tuning the framework for FX management with a view to ensuring a more effective and liquid FX market, taking into account Nigeria’s strategic development priorities; with the policies being designed within an environment of regularly ensuring consistency with monetary and fiscal policies.”
Interbank rates are expected to rise this week amid outflows from treasury bills auctions. The Central Bank of Nigeria will auction treasury bills worth N192.39 billion via the primary market, viz: 91-day bills worth N45.17 billion; 182-day bills worth N30 billion, and 364-day bills worth N117.22 billion.
Last week, interbank rates declined across all placement tenors amid significant boost in financial system liquidity. The Federal Accounts Allocation Committee authorised the disbursement of N387.7 billion to the 3 tiers of government. This represents a 4.8 percent increase from the N369.8 billion shared in the previous month.
The Overnight, 1 month, 3 months and 6 months NIBOR declined respectively to 0.88 percent (from 4.25%), 7.93 percent (from 8.77%), 9.14 percent (from 10.40%) and 10.42 percent (from 11.79%). Meanwhile, yields on the Nigerian Interbank True Treasury Bills mostly advanced – yields on the 1 month, 3 months and 6 months bills rose to 3.12 percent (from 2.18%), 4.54 percent (from 4.43%) and 7.09 percent from 7.28%) respectively. However, yields on the 12 months bill fell to 9.61 percent (from 10.04%).
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