Culled—Proshare
May 15, 2020
By Zedcrest Capital
FGN Bonds
It was a mixed session for FGN Bonds today, as market participants continue to evaluate the current market landscape to gauge market direction. Demand persisted at the short-end (2021s and 2024s) while we saw supply at the mid- (2025s and 2029s) and long-end (2034s and 2050s). Consequently, yields compressed by c.2bps on the average across the benchmark curve.
We expect the market to remain choppy in the interim, with clients shifting into shorter duration to cushion the effect of any yield movements as the market waits on the DMO auctions in the coming week for clarity.
| Benchmark FGN Bonds | ||||
| Description | Bid (%) | Offer (%) | Day Change (%) | |
| 14.50 15-Jul-21 | 8.03 | 4.92 | (0.04) | |
| 16.39 27-Jan-22 | 9.20 | 5.41 | (0.03) | |
| 12.75 27-Apr-23 | 10.72 | 8.59 | 0.00 | |
| 14.20 14-Mar-24 | 9.43 | 8.43 | (1.08) | |
| 13.53 23-Mar-25 | 9.34 | 8.19 | 0.35 | |
| 12.50 22-Jan-26 | 10.70 | 10.02 | (0.03) | |
| 16.29 17-Mar-27 | 11.16 | 10.62 | (0.01) | |
| 13.98 23-Feb-28 | 11.22 | 10.83 | (0.09) | |
| 14.55 26-Apr-29 | 11.79 | 10.98 | 0.39 | |
| 12.15 18-Jul-34 | 11.78 | 11.25 | 0.17 | |
| 12.40 18-Mar-36 | 11.83 | 11.60 | 0.07 | |
| 16.2499 18-Apr-37 | 11.94 | 11.50 | 0.00 | |
| 14.80 26-Apr-49 | 12.73 | 12.48 | 0.02 | |
Treasury Bills
The CBN opened the day with an OMO auction offer of N70Bn across 3 tenors to mop maturities of N209Bn which hit the system. The expectation of supply slowed down interests in OMO bills by both local banks and foreign investors. Nonetheless, we continued to see demand for short-dated maturities (June to July maturities) as banks with excess liquidity positions look to take on lower duration amid market uncertainty. Rates compressed by c.18bps on the average across the benchmark curve following the NO SALE announcement by the CBN.
Rates on NTBs jumped up at the open of today’s session as the market anticipated supply from the previous day’s auction to flood the streets. We, however, noted some of the maturities from the auction (12Nov2020 and 13May2021) trade positively below auction stop rates following some leftover demand from the auction. However, rates expanded by c.300bps on the average across the benchmark curve.
We expect the CBN to try another OMO auction tomorrow, and this should cause the current caution in the market to linger in the interim.
| OMO Auction Results – May 14, 2020 | |||||||
| Tenor | Stop Rate (%) | Offer (N’bn) | Sub. (N’bn) | Sales (N’bn) | |||
| 89-Day | NIL | 10.00 | 20.50 | NO SALE | |||
| 194-Day | NIL | 10.00 | 17.00 | NO SALE | |||
| 348-Day | NIL | 50.00 | 306.67 | NO SALE | |||
| Benchmark OMO Bills | |||||||
| Description | Bid (%) | Offer (%) | Day Change (%) | ||||
| NGOM 6/4/2020 | 7.00 | 4.00 | (2.75) | ||||
| NGOM 7/2/2020 | 9.00 | 5.00 | 0.00 | ||||
| NGOM 8/13/2020 | 9.75 | 5.00 | 0.00 | ||||
| NGOM 9/3/2020 | 9.75 | 5.00 | 0.00 | ||||
| NGOM 10/1/2020 | 9.75 | 6.00 | 0.00 | ||||
| NGOM 11/03/2020 | 9.50 | 6.00 | 0.00 | ||||
| NGOM 12/01/2020 | 10.00 | 6.00 | 1.00 | ||||
| NGOM 01/05/2021 | 11.00 | 9.75 | 0.00 | ||||
| NGOM 02/02/2021 | 10.80 | 9.50 | (0.05) | ||||
| NGOM 03/02/2021 | 10.80 | 9.01 | 0.00 | ||||
|
Benchmark NTBills | |||||||
| Description | Bid (%) | Offer (%) | Day Change (%) | ||||
| NIGTB 2-Jul-20 | 7.00 | 0.50 | 3.00 | ||||
| NIGTB 1-Oct-20 | 7.00 | 0.50 | 3.00 | ||||
| NIGTB 12-Nov-20 | 7.00 | 0.50 | 3.00 | ||||
| NIGTB 14-Jan-21 | 7.00 | 0.50 | 3.00 | ||||
| NIGTB 11-Feb-21 | 7.00 | 0.50 | 3.00 | ||||
Money Markets
Money Market rates dropped by c.330bps on the average as system liquidity improved following OMO maturities of c.N209Bn. OBB and OVN rates closed at 7.00% and 7.63% respectively, with market liquidity estimated to close at c.N337.10Bn following the CBN’s NO SALE at the day’s OMO auction.
The CBN should give another try to mop-up of excess liquidity with another OMO auction tomorrow, however, we don’t expect the outcome to largely affect money market rates which should close out the week in the single-digit range.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 3.60 | 7.00 |
| Overnight (O/N) | 4.40 | 7.63 |
FX Market
The I&E FX window saw some improvement today in traded volumes, with about $45million dollars crossed (c.64% increase D/D). Bids remained in the high rate, with a single trade breaching recent high to trade at N401.95/$ for the first time in three weeks. The closing rates remained largely stable across market sentiments.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 361.00 | 361.00 |
| CBN SMIS | 380.69 | 380.69 |
| I&E FX Window | 386.58 | 386.94 |
| Cash Market | 440.00 | 440.00 |
| Transfer Market | 460.00 | 460.00 |
Eurobonds
The NGERIA Sovereign, along with other sub-Saharan sovereign papers, took another bashing in today’s session despite the recent recoveries in global oil prices. Concerns of global economic recovery from the pandemic-driven shutdown have driven general risk-off sentiments by investors looking to cash out positions taken at lower levels. The NGERIA 2031s was the most active, as offers of the paper flooded the market. The selling pressure pushed yields up by c.38bps on the average across the benchmark curve.
The NGERIA Corps tickers, on the other hand, continued to see demand flows especially from local investors cycling out of their sovereign positions for higher yields available. The ZENITH 2022s, FIDBAN 2022s and ETINL 2024s all close the session stronger.
