Culled—Proshare
May 14, 2020
By Zedcrest Capital
FGN Bonds
Market participants continued to tread on a light note, as the direction of yields remains unclear. We noted some slight demand on select maturities at the short- (2023s) and mid-end (2028s and 2029s) of the benchmark curve. Bonds at the long-end of the curve (2034s and 2036s) continued to be better offered, but with no willing bids to match. Consequently, yields compressed by c.7bps on the average across the benchmark curve.
The DMO released its revised FGN Bonds Issuance Calendar for Q2’20, which will see the DMO raise an additional N105Bn monthly, in line with its revised borrowing plan. While the amount for this month’s auction remains unchanged at N60bn, we expect the DMO to take advantage of expected subscription to raise more than offered. We expect the market to react with higher rates in tomorrow’s session.
| Benchmark FGN Bonds | ||||
| Description | Bid (%) | Offer (%) | Day Change (%) | |
| 14.50 15-Jul-21 | 8.07 | 4.98 | (0.01) | |
| 16.39 27-Jan-22 | 9.22 | 5.40 | (0.01) | |
| 12.75 27-Apr-23 | 10.72 | 8.60 | 0.00 | |
| 14.20 14-Mar-24 | 10.50 | 8.44 | 0.10 | |
| 13.53 23-Mar-25 | 8.99 | 8.19 | (0.36) | |
| 12.50 22-Jan-26 | 10.72 | 10.05 | 0.02 | |
| 16.29 17-Mar-27 | 11.17 | 10.19 | (0.09) | |
| 13.98 23-Feb-28 | 11.31 | 10.73 | 0.00 | |
| 14.55 26-Apr-29 | 11.40 | 11.00 | (0.47) | |
| 12.15 18-Jul-34 | 11.61 | 11.15 | (0.09) | |
| 12.40 18-Mar-36 | 11.76 | 11.36 | 0.07 | |
| 16.2499 18-Apr-37 | 11.94 | 11.30 | 0.00 | |
| 14.80 26-Apr-49 | 12.71 | 12.48 | (0.05) | |
Treasury Bills
Rates on NTBs retraced in today’s session off the back of expected supply from the primary auction, expanding c.71bps on the average across the benchmark curve. At the NTB PMA, the DMO took advantage of healthy subscription levels to raise N142.76Bn across the three tenors on offer, 4.21X initially offered. Rates for the 91- and 182-day tenors moved higher by c.50bps on the average while the 364-day rates remained unchanged.
The improved supply from the primary auction is expected to heat up the secondary market, causing rates to inch even higher. The DMO’s aggressive borrowing, in line with its revised borrowing plan, could signal the beginning of an upward trend in NTBs rates.
| NTB Auction Results – May 14, 2020 | |||||||
| Tenor | Stop Rate (%) | Offer (N’bn) | Sub. (N’bn) | Sales (N’bn) | |||
| 91-day | 2.50 | 4.38 | 22.33 | 19.78 | |||
| 182-day | 2.85 | 12.92 | 41.19 | 40.09 | |||
| 364-day | 3.84 | 16.54 | 102.03 | 82.87 | |||
|
Benchmark OMO Bills | |||||||
| Description | Bid (%) | Offer (%) | Day Change (%) | ||||
| NGOM 6/4/2020 | 9.75 | 6.00 | 0.00 | ||||
| NGOM 7/2/2020 | 9.00 | 5.00 | 0.00 | ||||
| NGOM 8/13/2020 | 9.75 | 6.50 | 0.00 | ||||
| NGOM 9/3/2020 | 9.75 | 6.00 | 0.00 | ||||
| NGOM 10/1/2020 | 9.75 | 6.00 | 0.00 | ||||
| NGOM 11/03/2020 | 9.50 | 6.00 | 0.75 | ||||
| NGOM 12/01/2020 | 9.00 | 6.00 | 0.00 | ||||
| NGOM 01/05/2021 | 11.00 | 9.75 | 0.00 | ||||
| NGOM 02/02/2021 | 10.85 | 9.50 | 0.00 | ||||
| NGOM 03/02/2021 | 10.80 | 9.00 | (0.05) | ||||
|
Benchmark NTBills | |||||||
| Description | Bid (%) | Offer (%) | Day Change (%) | ||||
| NIGTB 2-Jul-20 | 4.00 | 0.50 | 1.25 | ||||
| NIGTB 1-Oct-20 | 4.00 | 0.50 | 1.00 | ||||
| NIGTB 12-Nov-20 | 4.00 | 0.50 | 0.75 | ||||
| NIGTB 14-Jan-21 | 4.00 | 0.50 | 0.40 | ||||
| NIGTB 11-Feb-21 | 4.00 | 0.50 | 0.15 | ||||
Money Markets
Money Market rates improved in today’s session, closing lower by c.50bps on the average to close at 7.00% and 7.63% for OBB and OVN respectively. Market liquidity remained stable, estimated to close at c.N212Bn.
We expect rates to move in tandem with system liquidity, the major driving force expected on the volume of OMO the CBN is expected to sell to mop up maturities of c.N296Bn.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 7.00 | 7.40 |
| Overnight (O/N) | 7.63 | 8.20 |
FX Market
The Naira remained stable for another consecutive session, posting no changes on the closing rates at most market segments. Volumes traded in the I&E FX window remain poor (c.$17Mn) off the back of little supply, with rates ranging between N380/$ to N390/$. The scarcity of the greenback is expected to remain in the interim as foreign investors and importers queue up at the CBN with pent up demand.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 361.00 | 361.00 |
| CBN SMIS | 380.69 | 380.69 |
| I&E FX Window | 386.94 | 386.94 |
| Cash Market | 440.00 | 445.00 |
| Transfer Market | 460.00 | 460.00 |
Eurobonds
The NGERIA Sovereign tickers continued its losing streak, as yields inched up for another consecutive session. Improved offers from local investors did nothing to bring out shy bids on the sovereign papers during the trading session. Yields inched up by c.33bps on the average across the sovereign curve.
It was a mixed session for the NGERIA Corps tickers, as the short-dated papers (ACCESS 2021s & UBANL 2022s) strengthened while the longer-dated (SEPPLN 2023s and ETINL 2024s) gave up recent gains on the day.
