The Federal Government’s bond prices are expected to drop further this week as investors switch to money market instruments for higher returns.
Also, at the international bond market analysts at Cowry Asset Management Limited anticipate a sustained sell off on most Nigerian Eurobonds in line with persistent downward pressure on international crude oil prices.
Last week, at the over-the-counter market, most tracked Federal Government bond prices declined (and yields advanced) amid sell-offs. The 20-year, 10.00% FGN July 2030 bond depreciated by N2.30 (yield increased to 13.39% from 12.84%); the 10-year, 16.39% FGN January 2022 instrument lost N1.85 (yield rose to 13.68% from 13.17%); the 7-year, 16.00% FGN June 2019 paper declined by N1.10 (yield advanced to 13.77% from 13.26%); while the 3-year, 13.05% FGN August 2016 debt slackened by N0.15 (yield climbed to 13.66% from 12.98%).
At the international bond market, Federal Government Eurobond prices fell across the board amid negative trend in price of crude oil. The 6.75% FGN January 2021 note fell by USD0.37 (yield increased to 5.36% from 5.29%) while the 5.13% FGN July 2018 debt went down by USD0.31 (yield rose to 4.39% from 4.32%); Similarly, the 6.38% FGN July 2023 bond pulled back by USD0.80 (yield jumped to 5.71% from 5.59%).
Analysts expect the local currency to remain under pressure this week amid growing concerns about falling international crude oil prices and external reserves which have necessitated a further downward review of the 2015 budget benchmark oil price to USD165/barrel.
The local currency had depreciated to an all time low of N188/USD prior to the CBN intervention and dollar sales by oil majors.
At the bureau de change segment, naira depreciated by 2.19% (or N4.00) to N186.50/USD1 (from N182.50/USD1) while it slid 2.18% (or N4.00) to N187.50/USD1 (from N183.50/USD1) at the parallel market segment.
Last week, the central bank offered USD400 million but sold USD459.51 million at the Retail Dutch Auction (RDAS) at N168/USD. Hence, the local currency depreciated week-on-week by 2.36% at the official window, from N164.13/USD. Naira also depreciated at all alternative market segments. At the interbank market, the local currency traded at N180.20/USD1 – a 0.84% decline from the previous N178.70/USD last week. This was despite active intervention by the CBN and dollar sales by oil majors – Addax Petroleum, ExxonMobil and Eni SpA which sold a combined USD55.5 million, while Royal Dutch Shell sold undisclosed sums.
On the other hand, interbank rates are expected to moderate this week as treasury bills worth N160.61 billion (viz: 73-day bills worth N8.97 billion and 134-day bills worth N151.63 billion) will mature via open market operations on Thursday, December 11, 2014. “Hence we anticipate boost in financial system liquidity with attendant moderation in interbank rates”, the analysts said.
In the week under review, the apex bank auctioned treasury bills worth N129.18 billion via the primary market. The treasury bills consisted of 91-day bills worth N27.85 billion; 182-day bills worth N30 billion; and 364-day bills worth N71.33 billion.
