Culled—Proshare
April 10, 2020
By Zedcrest Capital
FGN Bonds
Keeping up with the theme of the wee, yields dropped in the last trading session of the week, as demand from locals continued ahead of the holiday weekend. We noted demand across the curve, with the biggest gains on the 2024s and 2037s maturities at the mid- and long-end of the bond curve respectively. Yields dropped by c.12bps on the average across the benchmark curve, consolidating the week’s total drop to c.64bps. 
We expect a slowdown of demand once the market resumes after the holidays, as corporate primary market activity (Dangote N100bn Bond and Nigerian Breweries N30bn CP issues), as well as latest inflation figures take up investor focus.
| Benchmark FGN Bonds | ||||
| Description | Bid (%) | Offer (%) | Day Change (%) | |
| 14.50 15-Jul-21 | 5.93 | 5.47 | (0.14) | |
| 16.39 27-Jan-22 | 6.97 | 6.00 | 0.26 | |
| 12.75 27-Apr-23 | 9.83 | 8.95 | (0.18) | |
| 14.20 14-Mar-24 | 10.12 | 9.12 | (0.56) | |
| 13.53 23-Mar-25 | 11.99 | 10.36 | (0.16) | |
| 12.50 22-Jan-26 | 12.55 | 11.29 | (0.03) | |
| 16.29 17-Mar-27 | 12.34 | 12.00 | 0.00 | |
| 13.98 23-Feb-28 | 12.20 | 12.00 | (0.06) | |
| 14.55 26-Apr-29 | 12.18 | 12.00 | (0.13) | |
| 12.15 18-Jul-34 | 12.33 | 12.07 | (0.12) | |
| 12.40 18-Mar-36 | 12.40 | 12.05 | (0.14) | |
| 16.2499 18-Apr-37 | 12.40 | 12.28 | (0.24) | |
| 14.80 26-Apr-49 | 12.65 | 12.51 | 0.00 | |
Treasury Bills
Similarly, demand for OMO bills persisted to close the week as OMO maturities of c.N106.75bn hit the system. Bids across the benchmark OMO curve dropped by c.55bps on the average, despite an OMO announcement by the Central Bank around mid-day with results out shortly after the close of trading.
In its bid to close out excess liquidity, the Apex Bank sold a total N39.35bn at the OMO Auction in only one of three maturities on offer as demand continues to remain poor at the primary auction. The stop rate for the long-tenor (341-Day) on offer was maintained at 12.7999%.
After the holidays, we expect the market to resume on a cautious note as the new OMO supply filters into the secondary market.
| Benchmark OMO Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NGOM 5/14/2020 | 11.50 | 8.00 | (0.75) |
| NGOM 6/4/2020 | 11.50 | 8.00 | (0.75) |
| NGOM 7/2/2020 | 11.50 | 8.00 | (0.85) |
| NGOM 8/13/2020 | 11.75 | 10.00 | (0.75) |
| NGOM 9/3/2020 | 11.75 | 10.00 | (0.75) |
| NGOM 10/1/2020 | 12.00 | 10.50 | (0.75) |
| NGOM 11/03/2020 | 12.25 | 11.00 | (0.25) |
| NGOM 12/01/2020 | 12.50 | 11.00 | (0.25) |
| NGOM 01/05/2021 | 12.50 | 10.80 | (0.25) |
| NGOM 02/02/2021 | 12.40 | 10.00 | (0.30) |
| NGOM 03/02/21 | 12.40 | 11.00 | (0.35) |
| Benchmark NTBills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NIGTB 2-Jul-20 | 2.10 | 1.00 | (0.05) |
| NIGTB 1-Oct-20 | 3.10 | 1.00 | (0.10) |
| NIGTB 12-Nov-20 | 3.80 | 1.00 | 0.00 |
| NIGTB 14-Jan-21 | 4.00 | 2.00 | 0.00 |
| NIGTB 11-Feb-21 | 4.00 | 1.00 | 0.00 |
Money Markets
The interbank opened with a huge shock, as the market participants woke to CRR debits that hit the previous night. That debit, along with funding pressures for the CBN FX intervention, pushed money market rates as high as 20% intraday. OBB and OVN rates eventually settled to close at 15.00% and 16.83% respectively.
We expect money market rates to crash upon resumption after the break as the CRR debit was eventually reversed by the CBN at the close of the day, bringing system liquidity back to buoyant levels.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 15.00 | 2.83 |
| Overnight (O/N) | 16.83 | 3.17 |
FX Market
The Naira stabilized the close the week, as the I&E FX close, CBN Spot and SMIS rates all remained unchanged for a second consecutive day. Trades at the I&E FX window jumped up 93% to $146m, the highest traded volume seen in the last two weeks.
It was a similar story of stability at the parallel market, as the transfer market stayed stable to close the week at N430.00/$ while the cash rate gained a further N1 to close at N414.00/$.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 361.00 | 361.00 |
| CBN SMIS | 380.69 | 380.69 |
| I&E FX Window | 384.83 | 384.83 |
| Cash Market | 414.00 | 415.00 |
| Transfer Market | 430.00 | 430.00 |
Eurobonds
The market held its breath as all eyes were fixed on the outcome of OPEC++ virtual meeting pushing BRENT prices as high as $36/barrel intraday as the market expected oil production cuts in excess of 10million barrels per day (mb/d). This jump in global oil prices positively impacted the NGERIA Sovereigns, pushing yields on the curve down further by c.49bps on the average. Demand remained pertinent across most the sovereign papers, most notably at short- and mid-end of the curve.
The NGERIA Corps tickers also traded with renewed demand, with the bank papers making the most gains. The biggest gainer was the ETINL 2024s paper (+110bps), followed closely by the FIDBAN 2022s (+90bps) while the ACCESS 2021s (+56bps) rounded up the top three.
We expect the markets to claw back some of those gains upon resumption, as the eventual OPEC++ deal (of an initial production cut of 10mb/d for 2 months starting May, and then 8mb/d for the subsequent 6 months) fell below the market expectations considering the overall amount in demand lost due to the COVID-19 pandemic, crashing oil prices back to close at 31.78/barrel.
