Culled—Proshare
March 19, 2020
By Zedcrest Capital
Below are highlights of trading activities in the fixed income and forex market on March 18, 2020
FGN Bonds
The Bonds Markets pulled back its recent gains, as yields rose across the bond curve following weak global market sentiments. Yields repriced higher opening the market, as global oil prices continued to fall as much as 12.00%. However, trades continued to cross at market offers, as supply seems insufficient to accommodate demand from locals looking to reinvest bond coupon payments received this week. Consequently, yields expanded by c.25bps across the benchmark bond curve.
We expect the market the trade cautiously, as reactions to the Covid-19 virus pandemic deepens. We also expect local players to continue to cherry-pick offers at the current market as they look to reinvest cash balances at these elevated levels.
| Benchmark FGN Bonds | ||||
| Description | Bid (%) | Offer (%) | Day Change (%) | |
| 14.50 15-Jul-21 | 9.14 | 6.99 | 0.77 | |
| 16.39 27-Jan-22 | 10.30 | 7.87 | (0.01) | |
| 12.75 27-Apr-23 | 10.80 | 10.00 | 0.00 | |
| 14.20 14-Mar-24 | 12.75 | 10.19 | 0.18 | |
| 13.53 23-Mar-25 | 13.25 | 11.12 | 0.55 | |
| 12.50 22-Jan-26 | 13.50 | 12.45 | 0.26 | |
| 16.29 17-Mar-27 | 12.99 | 12.64 | (0.50) | |
| 13.98 23-Feb-28 | 13.50 | 12.46 | 0.55 | |
| 12.15 18-Jul-34 | 13.50 | 12.63 | (0.26) | |
| 12.40 18-Mar-36 | 13.50 | 12.45 | 0.42 | |
| 16.2499 18-Apr-37 | 13.50 | 12.33 | 0.65 | |
| 14.80 26-Apr-49 | 13.50 | 12.13 | 0.62 | |
Treasury Bills
It was a flurry of activity in the Treasury Bills market as demand from local banks pushed rates on OMO maturities downward especially at the long end of the curve. We noted Feb. & Mar. maturities traded down to 15.25% levels (almost 100bps lower than the previous close), as local players contemplate lack of OMO supply by the CBN and looked to reinvest maturities expected later in the week. Yields dipped by an average of c.10bps across the benchmark OMO curve.
NTBs also saw improved demand as local investors continue to outweigh supply at the bi-weekly auction. Yields compressed by an average of c.18bps across the benchmark NTB curve.
At the Primary Market Auction, the DMO sold a total N47.57bn, cutting its rates by 19bps, 38bps and 70bps across the 91-, 182- and 364-day tenors respectively.
We expect demand for OMO bills to continue in tomorrow’s trade session as OMO maturities hit the system.
| Primary Market Auction Results – 18 Mar 2020 | ||||
| Tenor | Offer (N’bn) | Subscription (N’bn) | Allotment (N’bn) | Stop Rate (%) |
| 91 days | 2.00 | 8.95 | 2.00 | 2.30 |
| 182 days | 8.39 | 27.36 | 8.39 | 3.40 |
| 364 days | 37.18 | 92.37 | 37.18 | 4.60 |
| Benchmark OMO Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NGOMO 2-Apr-20 | 18.00 | 15.00 | 0.00 |
| NGOMO 14-May-20 | 18.00 | 10.00 | 0.00 |
| NGOMO 4-Jun-20 | 18.00 | 13.00 | 0.00 |
| NGOMO 2-Jul-20 | 18.00 | 13.00 | 0.00 |
| NGOMO 13-Aug-20 | 18.00 | 13.00 | 0.00 |
| NGOMO 3-Sep-20 | 18.00 | 14.50 | 0.00 |
| NGOMO 1-Oct-20 | 18.00 | 13.00 | 0.40 |
| NGOMO 3-Nov-20 | 18.00 | 13.00 | 0.00 |
| NGOMO 1-Dec-20 | 17.50 | 13.00 | (0.50) |
| NGOMO 5-Jan-21 | 17.50 | 15.50 | (0.50) |
| NGOMO 02-Feb-21 | 17.50 | 13.00 | (0.50) |
| Benchmark NTBills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NIGTB 2-Apr-20 | 3.00 | 1.50 | 0.30 |
| NIGTB 2-Jul-20 | 3.50 | 1.00 | (0.10) |
| NIGTB 1-Oct-20 | 4.00 | 1.00 | (1.00) |
| NIGTB 12-Nov-20 | 5.00 | 2.00 | (0.25) |
| NIGTB 14-Jan-21 | 5.50 | 3.00 | (0.20) |
| NIGTB 11-Feb-21 | 6.00 | 2.00 | 0.00 |
Money Market
System Liquidity opened with c.N295.90bn positive, as bond coupon payments of c.N41bn bolstered liquidity. OBB and OVN rates dropped further by an average of 137bps to close at 10.40% and 11.20% respectively.
We expect rates to drop further tomorrow as OMO maturities hit the system. There remains an outside chance for an OMO auction by the CBN to manage excess liquidity levels.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 10.40 | 11.71 |
| Overnight (O/N) | 11.20 | 12.64 |
FX Market
At the Interbank, the Naira/USD spot and SMIS rates remained stable to close at N307.00/$ and N358.51/$ respectively. At the I&E FX window, the Naira depreciated against the dollar by 45k to close at N368.02/$.
At the parallel market, cash and transfer rates strengthened by N3 and N10 to close at N375.00/$ and N400.00/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 307.00 | 307.00 |
| CBN SMIS | 358.51 | 358.51 |
| I&E FX Window | 368.02 | 367.57 |
| Cash Market | 375.00 | 378.00 |
| Transfer Market | 400.00 | 410.00 |
Eurobond
The NGERIA Sovereign tickers continued to weaken as global oil prices continue its free fall and the Covid-19 viral pandemic lingers. Yields spiked by an average of c.80bps across the benchmark sovereign curve, with the 2025s and 2031s as highest yielding papers at 15.15% and 14.50%.
Similarly, the NGERIA Corps tickers also traded on a bearish note, with some paper weakening losing as high as 500bps in the session. The biggest losers of the day were the ZENITH 2022s and FIDBAN 2022s which weakened by c.536bps and c.539bps respectively.
We expect to see pockets of demand from local investors as yields at these levels provide attractive hedged investments against a depreciating currency.
