Investors anticipate higher rates as DMO offers N115bn FGN bonds
THE Debt Management Office (DMO) will this week issue N115 billion worth of FGN bonds with investors anticipating the bonds will be issued at higher interest rate.
The bond offer, which represents 28 percent higher than the N90 billion offered in September, comprises: 5-year bond of N35 billion with 12.75 percent coupon, 7-year bond of N35 billion with 13.35 percent coupon, and 10-year bond of N45 billion with 13.98 coupon.
The N90 billion worth of FGN bond offered by the DMO last month enjoyed 250 percent oversubscription. Hence the DMO raised N96.74 billion with stop rates 57 basis points higher than the August bond offer.
Hence investors anticipate higher stop rates this week, given the increase in amount of bond on offer as well as renewed upward trend in inflation rate, which rose further to 11.28 percent in September.
Confirming this expectation, analysts at Lagos based Cowry Assets said: “We expect the bonds to be issued at higher stop rates in line with inflationary trend and slowing economic growth.”
Also commenting, analysts at Lagos based Vetiva Capital Management Limited said: “Following the release of the October bond circular which indicates an increase in bond supply, we foresee yields advancement in the bond space.”
Naira appreciates as CBN injects $547m
The naira last week appreciated marginally in the Investors and Exporters (I&E) window following the increased intervention of the Central Bank of Nigeria (CBN) in the interbank foreign exchange market.
The apex bank injected $547 million into the market on Tuesday and Friday, up from the $210 million injected the previous week.
On Tuesday, the apex bank injected $210 million comprising $100 million for wholesale segment, $55 million for SME window and $55 million for invisibles.
On Friday the apex bank held another round of intervention by injecting $337 million. According to Director, Corporate Communication Department, CBN, Mr. Isaac Okoroafor said: “The CBN intervened in the Retail Secondary Market Sales (SMIS) to the tune of $337.33 million in addition to the sum of CNY53.44 million in the spot and short tenored forwards of the inter-bank foreign exchange market.”
He reiterated that the move was in furtherance of the bank’s commitment to ensuring adequate liquidity and stability in the inter-bank foreign exchange market.
Consequently the naira remained stable at N360 per dollar in the parallel market while it appreciated marginally by 10 kobo in the I&E window.
Data from FMDQ showed that the indicative exchange rate for the window dropped to N364.02 per dollar last week from N364.12 per dollar the previous week.
Credit to economy rises by 4.52% to N26trn
Net credit to the domestic economy rose by 4.52 percent to N26 trillion in September.
However, the increase was dominated by credit to the government which rose by 13.13 percent during the month.
These were highlights of the Depository Corporation survey of the CBN for September released last week.
The survey showed a 1.68 percent Month-on-Month ( m-o-m) increase in Broad Money supply to N25.28 trillion in September 2018; as a 1.60 percent m-o-m marginal increase in Net Domestic Assets (NDA) to N15.44 trillion was supported by the 2.19 percent m-o-m increase in Net Foreign Assets (NFA) to N18.82 trillion.
On domestic asset creation, the marginal increase in NDA resulted from an increase of 4.52 percent in Net Domestic Credit (NDC) to N25.97 trillion which was offset by a strong 9.11 percent m-o-m increase in Other Liabilities (net) to N10.53 trillion.
Further breakdown of the NDC showed a 43.43 percent m-o-m increase in Credit to the Government to N3.41 trillion (its share of NDC rose to 13.13 percent from 9.57 percent), accompanied by an increase of 0.40 percent in Credit to the Private sector to N22.56 trillion (its share of NDC fell to 86.87 percent from 90.43 percent).
On the liabilities side, 1.68 percent m-o-m rise in Broad Money Supply followed a 1.28 percent m-o-m growth in Quasi Money (near maturing short term financial instruments) to N14.60 trillion. Also, Narrow Money rose by 2.23 percent to N10.68 trillion (as Demand Deposits which rose by 1.89 percent to N9.07 trillion was accompanied by a 4.25 percent rise in currency outside banks to N1.61 trillion).
Meanwhile, Reserve Money (Base Money) increased m-o-m by 1.70 percent to N6.80 trillion as bank reserves rose m-o-m by 2.64 percent to N4.53 trillion; however, Currency in circulation decreased m-o-m by 0.12 percent to N1.92 trillion