Culled—Proshare
May 8. 2020
By Zedcrest Capital
FGN Bonds
The FGN bond market continued to trade on a light note with improved offers emerging, especially on the mid- to- long-end of the curve. We noted increased supply chasing fewer bids, as the market tries to price in expected increase sales at the monthly bond auction by the DMO. Average yields moved c.61bps higher across the benchmark curve, while the 2027s and 2049s remained the most actively traded bonds in the market.
We expect trades to remain scanty in the near term, with some local investors expected to take advantage and cherry-pick improved offers.
| Benchmark FGN Bonds | ||||
| Description | Bid (%) | Offer (%) | Day Change (%) | |
| 14.50 15-Jul-21 | 6.48 | 4.23 | (0.02) | |
| 16.39 27-Jan-22 | 7.54 | 5.34 | (0.04) | |
| 12.75 27-Apr-23 | 9.97 | 8.50 | (0.01) | |
| 14.20 14-Mar-24 | 10.18 | 8.32 | 0.08 | |
| 13.53 23-Mar-25 | 8.89 | 8.15 | (0.08) | |
| 12.50 22-Jan-26 | 9.70 | 9.20 | 0.50 | |
| 16.29 17-Mar-27 | 10.90 | 10.46 | 0.17 | |
| 13.98 23-Feb-28 | 11.14 | 10.79 | 0.01 | |
| 14.55 26-Apr-29 | 11.30 | 10.69 | 0.06 | |
| 12.15 18-Jul-34 | 11.36 | 10.95 | 0.13 | |
| 12.40 18-Mar-36 | 11.50 | 11.22 | (0.04) | |
| 16.2499 18-Apr-37 | 11.51 | 11.20 | 0.13 | |
| 14.80 26-Apr-49 | 12.48 | 12.35 | 0.13 | |
Treasury Bills
Activity in the Treasury Bills Market picked up in today’s session, with bullish sentiments seen towards the longer-dated OMO maturities. We noted sizeable interest by local banks which may be attributed to the lack of OMO auction as anticipated by the market. The January bills saw most of the market activities trading around mid-10% levels, whilst the bid/offer spread on the 30Mar2021 OMO bills tightened but close enough to cross volumes.
The NTB side continued to see lethargic activity, as retail-sized volumes were consummated on the long-end. Yields dropped by an average of c.40bps on the offer across the benchmark NTB curve.
We expect tighter interbank system liquidity to dampen demand for OMO bills in tomorrow’s session.
| Benchmark OMO Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NGOM 5/14/2020 | 9.75 | 7.70 | (0.10) |
| NGOM 6/4/2020 | 11.00 | 6.00 | 0.00 |
| NGOM 7/2/2020 | 9.00 | 4.02 | (1.98) |
| NGOM 8/13/2020 | 11.00 | 6.50 | (0.50) |
| NGOM 9/3/2020 | 11.00 | 8.75 | 1.00 |
| NGOM 10/1/2020 | 11.00 | 8.00 | 0.00 |
| NGOM 11/03/2020 | 11.00 | 9.25 | 1.25 |
| NGOM 12/01/2020 | 11.00 | 8.50 | 0.00 |
| NGOM 01/05/2021 | 10.80 | 10.40 | 0.40 |
| NGOM 02/02/2021 | 11.10 | 9.50 | (0.50) |
| NGOM 03/02/21 | 11.10 | 9.00 | 0.00 |
| Benchmark NTBills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NIGTB 2-Jul-20 | 4.00 | 0.50 | 0.00 |
| NIGTB 1-Oct-20 | 4.00 | 0.50 | (0.50) |
| NIGTB 12-Nov-20 | 4.00 | 0.50 | (0.50) |
| NIGTB 14-Jan-21 | 4.00 | 0.50 | (0.50) |
| NIGTB 11-Feb-21 | 4.00 | 0.50 | (0.50) |
Money Markets
With low funding pressures so far this week, the interbank market stayed boosted with a fair amount of liquidity at around c.N266Bn. The OBB and OVN rates closed the day lower at 2.00% and 3.00%.
We expect rates to increase in the interbank market to close the week, due to the bi-weekly retail FX auction funding.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 2.00 | 3.55 |
| Overnight (O/N) | 3.00 | 4.25 |
FX Market
The Naira gave up some of its recent gains at the I&E FX window today, losing 0.43% of its value to close at N386.38/$ with as the greenback remains in short supply in the market. The CBN spot rate and SMIS rates remained unchanged again to close the day at N361/$ and N380.69/$ respectively.
In other news, the CBN weakened the Naira rates in the derivatives market by adjusting the rates upward by c.14.51% on the average across all the tenors available on the OTC FX futures. With this, we expect the Spot market may follow suit as it is already weakened by the shortage of FX supply in all market segments.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 361.00 | 361.00 |
| CBN SMIS | 380.69 | 380.69 |
| I&E FX Window | 386.38 | 384.50 |
| Cash Market | 436.00 | 436.00 |
| Transfer Market | 455.00 | 455.00 |
Eurobonds
The NGERIA Sovereign tickers continued to rally, as demand strengthened amid improving crude oil prices. Yields compressed further by c.43bps across the sovereign curve, with interests concentrated at the short- (2021s and 2023s) and mid-end (2031s) of the curve.
The NGERIA Corps tickers were fairly quiet, with the exception of sustained demand interests in FIDBAN 22s and UBA 22s.
