Culled—Proshare
March 24, 2020
by Zedcrest Capital
FGN Bonds
The Bonds Markets continued on a quiet note, as activities remained somber across the curve. With one eye on the potential outcome of the MPC meeting, market players traded cautiously, especially on the long-end of the curve. However, we saw some slight demand at the short- (2022s) to mid-end (2028s) as investors seemed more comfortable at the head and belly of the bond curve.
At the MPC meeting, the committee maintained the Monetary Policy Rate (MPR) at 13.50%. It also retained the Cash Reserve Ratio (27.50%) and Liquidity Ratio at 30%. The asymmetric corridor also remained unchanged at +200/-500 bps around the MPR. The committee further reiterated that its decision to retain controlling rates was informed by the need to observe the impact of the invention plans, already in place to save the economy from the downing effect of the COVID-19 pandemic.
We still expect the market players to tread cautiously, as attention shifts to tomorrow’s bond PMA.
| FGN Bonds Expectation – 25 March 2020 | |||
| Tenor | Offer (N’bn) | Expected Stop Rate (%) | Previous Stop Rate (%) |
| APR 2023 | 15.00 | 8.20-9.00 | 8.75 |
| MAR 2035 | 15.00 | 10.30-11.00 | 10.70 |
| APR 2050 | 20.00 | 12.00-12.50 | 12.15 |
| Benchmark FGN Bonds | ||||
| Description | Bid (%) | Offer (%) | Day Change (%) | |
| 14.50 15-Jul-21 | 7.86 | 5.47 | (0.05) | |
| 16.39 27-Jan-22 | 9.13 | 6.42 | (0.01) | |
| 12.75 27-Apr-23 | 11.95 | 10.79 | 0.58 | |
| 14.20 14-Mar-24 | 13.35 | 11.09 | 0.15 | |
| 13.53 23-Mar-25 | 13.11 | 11.01 | 0.27 | |
| 12.50 22-Jan-26 | 12.99 | 12.26 | 0.00 | |
| 16.29 17-Mar-27 | 13.21 | 12.36 | (0.01) | |
| 13.98 23-Feb-28 | 13.20 | 12.55 | (0.01) | |
| 14.55 26-Apr-29 | 13.20 | 12.49 | (0.01) | |
| 12.15 18-Jul-34 | 13.20 | 12.45 | (0.01) | |
| 12.40 18-Mar-36 | 13.20 | 12.67 | (0.01) | |
| 16.2499 18-Apr-37 | 13.20 | 12.64 | (0.01) | |
| 14.80 26-Apr-49 | 13.36 | 12.80 | 0.06 | |
Treasury Bills
The Treasury Bills market opened on a somber note, as we noticed mainly client-driven axes on OMO bills. The mid-end of the OMO curve (Sept/Oct) continued to see the most traction, as it provided market players an equally attractive yield as the long-tenured OMO bills but a shorter duration. We also saw some order-driven sell-off by mostly offshore investors on the long-end. Yields expanded by an average of c.45bps across the benchmark OMO curve.
The NTB side traded on a flat note as we saw little to no interest across the NTB curve. Yields remained stable D/D across the benchmark NTB curve.
We expect to see more client-driven demand on the mid-end of the OMO curve, as yields seem attractive to market players.
| Benchmark OMO Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NGOMO 2-Apr-20 | 17.00 | 15.50 | 0.00 |
| NGOMO 14-May-20 | 17.50 | 13.00 | 0.50 |
| NGOMO 4-Jun-20 | 17.50 | 13.00 | 0.50 |
| NGOMO 2-Jul-20 | 17.50 | 13.00 | 0.50 |
| NGOMO 13-Aug-20 | 17.50 | 13.00 | 0.50 |
| NGOMO 3-Sep-20 | 17.50 | 13.00 | 0.50 |
| NGOMO 1-Oct-20 | 17.00 | 13.25 | 0.50 |
| NGOMO 3-Nov-20 | 17.50 | 13.00 | 0.50 |
| NGOMO 1-Dec-20 | 17.50 | 13.00 | 0.50 |
| NGOMO 5-Jan-21 | 17.50 | 13.00 | 0.50 |
| NGOMO 02-Feb-21 | 17.50 | 13.00 | 0.50 |
| Benchmark NTBills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NIGTB 2-Apr-20 | 3.50 | 1.00 | 0.00 |
| NIGTB 2-Jul-20 | 4.50 | 1.00 | 0.00 |
| NIGTB 1-Oct-20 | 6.00 | 1.00 | 0.00 |
| NIGTB 12-Nov-20 | 7.00 | 2.00 | 0.00 |
| NIGTB 14-Jan-21 | 7.00 | 3.00 | 0.00 |
| NIGTB 11-Feb-21 | 7.00 | 2.00 | 0.00 |
Money Market
The Interbank market continued to be a takers delight, with rates remaining depressed, as system liquidity still opened buoyant (c.N307bn positive). OBB and OVN rates dipped by c.150bps to close at 4.83% and 5.25% respectively.
We expect rates to dip further in tomorrow’s session, as we expect tranches of the approved FAAC money to flow in.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 4.83 | 6.00 |
| Overnight (O/N) | 5.25 | 6.93 |
FX Market
At the interbank, the Naira/USD spot rate depreciated by N1 to close at N361.00/$, while the SMIS rates closed at N358.51/$. At the I&E FX window, the Naira appreciated against the dollar by 22k to close at N380.53/$.
At the parallel market, cash and transfer rates were unchanged at N396.00/$, and N410.00/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 361.00 | 360.00 |
| CBN SMIS | 358.51 | 358.51 |
| I&E FX Window | 380.53 | 380.75 |
| Cash Market | 396.00 | 396.00 |
| Transfer Market | 410.00 | 410.00 |
Eurobond
Yields in the NGERIA Sovereign market, recovered slightly D/D, as we saw demand across the curve. Despite Nigeria’s government cut in crude oil prices to clear out the glut in cargoes, benchmark oil prices improved D/D by c.6.97% to clear at $29.91 per barrel. Yields compressed by c.35bps across the sovereign curve.
The NGERIA Corps tickers traded on a quiet note, as yields remained relatively unchanged D/D among most tracked papers, with only the ETINL 2024s having a significant move, weakening by c.6.41% to close the day.
