Culled—Proshare
September 25, 2020
By Zedcrest Capital
FGN Bonds
Yields in the Bonds market continued down the bullish train, as demand from lost bids in the previous day’s FGN bond auction flowed into the secondary market. The market, again, opened uncertain of where levels will settle in the first trading hour. Improved bids began to firm up for some of the auction-offered bonds (2026s, 2035s, and 2050s), while interest on the 2045s waned. With the market net-long ahead of the auction, it didn’t take long before supply from dealers flooded the markets, causing a slight pull-back in yields. Nonetheless, yields compressed by c.28bps on the average across the benchmark yield curve to close the session.
We expect the market to remain volatile for the week’s final trading session, with offers expected to improve some more as bondholders look to sell-off old stock at these lower levels.
| Benchmark FGN Bonds | ||||
| Description | Bid (%) | Offer (%) | Day Change (%) | |
| 16.39 27-Jan-22 | 2.86 | 1.84 | (1.14) | |
| 12.75 27-Apr-23 | 4.45 | 1.96 | (0.10) | |
| 14.20 14-Mar-24 | 4.44 | 2.15 | (0.11) | |
| 13.53 23-Mar-25 | 4.62 | 3.76 | (0.53) | |
| 12.50 22-Jan-26 | 6.23 | 5.85 | (0.02) | |
| 16.29 17-Mar-27 | 7.68 | 5.93 | (0.02) | |
| 13.98 23-Feb-28 | 7.99 | 6.28 | 0.19 | |
| 14.55 26-Apr-29 | 7.95 | 7.25 | (0.11) | |
| 12.15 18-Jul-34 | 9.17 | 7.98 | (0.33) | |
| 12.40 18-Mar-36 | 9.21 | 7.89 | (0.29) | |
| 16.2499 18-Apr-37 | 9.23 | 8.00 | (0.32) | |
| 14.80 26-Apr-49 | 9.25 | 8.76 | (0.55) | |
Treasury Bills
The T-bills market had a quieter session today, as market participants shifted their focus to the supply from the OMO auction floated by the CBN. Rates continued to move lower in the secondary market for most of the session, with little volume s passed. Consequently, Rates on the benchmark OMO curve dropped by another c.39bps on the average to close the session.
At the primary auction, the CBN issued a total of N70BN while cutting the stop rates by c.12bps on the average across the three tenors on offer. Demand remained skewed towards the long-dated paper offered (348-day) with a bid-to-cover ratio of c.3.01X, as foreign portfolio investors hunt for the highest yield available.
We expect a more active market to close out the week, as the CBN is expected to drain system liquidity via various debits while supply from the auction flows to the secondary markets.
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Money Markets
System liquidity opened the day at N456BN positive and was further bolstered by inflows from OMO maturities (c.N230BN) and FX Retail FX refund (c.N.240BN). Interbank rates remained stable as the OMO sale of N70BN did little to stem the excess liquidity. OBB and OVN rates remained stable to closed at 1.00% and 1.83% respectively.
We expect rates to close the week considerably higher as outflows via FX Retail debits and bond auction debits hit the system tomorrow. There also remains the outside chance for a CRR debit on local banks by the CBN to take some excess liquidity levels.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 1.00 | 1.00 |
| Overnight (O/N) | 1.83 | 1.75 |
FX Market
The I&E Window traded on a more active note today, with traded volumes up 43% ($98.69mio traded) D/D. Despite rates trading in a tighter band of N7.34k (50k tighter D/D), the closing rate remained unchanged at N386.00. Other market segments also remained unchanged on the day.
With CBN expected to inject some liquidity via its bi-weekly Retail FX auction set for tomorrow, we don’t expect any significant movement in rates across the board to close out the week.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 379.00 | 379.00 |
| CBN SMIS | 380.69 | 380.69 |
| I&E FX Window | 386.00 | 386.00 |
| Cash Market | 465.00 | 465.00 |
| Transfer Market | 480.00 | 480.00 |
Eurobonds
It was a pretty calm session for SSA Eurobonds despite general weak sentiments persisting for the sovereign papers The NGERIA Sovereign curve weakened again by another c.17bps as offshore investors continue to stay in risk-off mode. We noted some recovery in EGYPTs and ANGOLAs as some buyers emerged for those names, but in significant volumes seen.
The NGERIA Corporates had a relatively quiet session as well, with gains on the ZENITH 2022s (+95bps) singling it out as the star of the trading session.
