Bond Yields Continue Downward Trend as Demand Persists for a 3rd Consecutive Session

Proshare

Wednesday, February 03, 2021 / 10:56AM / by Zedcrest Capital / Header Image Credit: Pexels

 

Proshare Nigeria Pvt. Ltd.


FGN Bonds

Yields in the FGN bond market continued to drop in today's trading session, as we continued to see demand for FGNs across the curve by local investors. Demand at the short - (2023s and 2024s), mid- (2028s and 2029s) and long-ends (2034s and 2049s) dominated most of the trading session. Yields compressed by c.07bps on the average across the benchmark FGN bond curve, consolidating the c.29bps drop witnessed at the of Monday's trading session.

 

The expansionary stance of the MPC from the previous week meeting is seen as a major driver for the recent demand. We maintain a cautionary stance especially as yields approach resistance levels of 8% and 10% at the mid- and long-end of the curve.

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

6.50

5.35

0.00

14.20 14-Mar-24

6.85

6.00

(0.20)

13.53 23-Mar-25

7.10

6.25

0.00

12.50 22-Jan-26

7.65

7.10

(0.25)

16.29 17-Mar-27

8.75

8.10

0.00

13.98 23-Feb-28

8.80

8.20

(0.10)

14.55 26-Apr-29

8.95

8.50

(0.15)

12.15 18-Jul-34

10.30

9.95

0.00

12.50 27-Mar-35

10.30

9.95

(0.05)

12.40 18-Mar-36

10.35

10.00

0.00

16.2499 18-Apr-37

10.35

10.00

(0.05)

9.80 24-Jul-45

10.50

10.15

(0.10)

14.80 26-Apr-49

10.60

10.15

(0.10)

12.98 27-Mar-50

10.75

10.15

0.00

 

Treasury Bills

Rates in the OMO market took an aggressive ride upwards despite some respite in tight system liquidity in via OMO maturities received today. The CBN credited a total of c.N112Bn of OMO maturities today, but this injection of liquidity did nothing to support demand for OMO bills by local banks. Consequently, we saw continued selling pressure of long-dated OMO papers from offshore FPIs, driving rates for the January 2022 papers higher by c.50bps to close the session at 6% levels. Rates across the benchmark OMO curve increased c.44bps on the average at the end of the day's trading session.

 

Conversely, we noted continued interest for NTB papers around the 90-day mark (April to May 2021 papers) but with scarce supply unable to meet the demand for a trade. The mid - to long-dated papers did not enjoy similar attention, pushing rates higher across the benchmark NTB curve increased c.13bps on the average to close the session.

 

With OMO bills trading at rates higher than the last OMO auction stop rate, we expect to see reduced demand from local banks as they look to see if supply from the anticipated OMO auction will print at higher rates later in the week.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 03/02/21

6.00

0.03

0.00

NGOMOB 0 05/11/21

6.50

0.03

0.50

NGOMOB 0 06/08/21

6.50

0.04

0.50

NGOMOB 0 08/10/21

6.50

0.04

0.00

NGOMOB 0 09/07/21

7.00

0.04

0.50

NGOMOB 0 10/19/21

8.00

0.05

1.00

NGOMOB 0 11/02/21

8.00

0.05

1.00

NGOMOB 0 12/07/21

8.00

0.05

0.00

NGOMOB 0 01/13//22

8.00

0.05

0.00

 

                               Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 02/11/21

6.00

0.03

0.00

NIGTB 0 03/11/21

6.00

0.03

0.00

NIGTB 0 04/29/21

6.00

0.03

0.00

NIGTB 0 05/13/21

6.50

0.03

0.50

NIGTB 0 06/10/21

6.50

0.04

0.50

NIGTB 0 07/01/21

6.50

0.04

0.00

NIGTB 0 08/26/21

6.75

0.04

0.25

NIGTB 0 09/09/21

6.75

0.04

(0.25)

NIGTB 0 10/14/21

8.00

0.05

1.00

NIGTB  0 11/11/21

7.00

0.05

(1.00)

NIGTB  0 01/11/22

8.00

0.05

0.00

NIGTB 0 02/11/21

6.00

0.03

0.00

NIGTB 0 03/11/21

6.00

0.03

0.00

 


Proshare Nigeria Pvt. Ltd. 


Money Markets

Rates in the Money market eased by an average of c.100bps as system liquidity eased slightly after receiving inflows via OMO maturities (c.N112Bn). OBB and Overnight rates closed the day at 9.50% and 9.67%, respectively, as system liquidity closed the day at c.N210Bn (99.95% increase D/D).

 

We maintain our expectation for elevated rates for most of the week as expected outflows (OMO auction & FX Retail Auction debits) outweigh inflows hitting the banking system.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

9.50

10.00

Overnight (O/N)

9.67

10.25

 


FX Market

The I&E FX window continued to trade scantily for another trading session, with only about c.$29mio traded, with closing rates printing at N395.00/$ (0.25% depreciation D/D). Rates remained unchanged at the parallel market, with both the cash and transfer rates closing at N476.50/$ and N 489.00/$ respectively.

 

FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

395.00

394.00

Cash Market

476.50

476.50

Transfer Market

489.00

489.00

 

 

Eurobonds

Trading activities in the NIGERIA Sovereigns picked up steam following the recent rally of global oil prices. With BRENT Crude trading at $57.54pb (a 2.11% D/D increase), we saw a correlated drop in yields across the sovereign SSA space as the Nigeria Sovereign yield curve compressed by an average of c.7bps. Other SSA sovereigns benefiting from the positive sentiments were Angola, Ghana, Egypt and Turkey.

 

The NIGERIA Corps tickers also saw yield gains during the trading session as demand for the papers strengthened. The ACCESS 2021s, UBANL 2022s and SEPPLN 2023s led the pack, as yields on those papers compressed by cc. 51bps, c.111bps and c.59bps respectively.


Proshare Nigeria Pvt. Ltd.




Proshare Nigeria Pvt. Ltd. 




Related News


1.       Commercial Papers to Increase in Q1, 2021 - Oluwatosin Ayanfalu

2.      TOTAL Notifies of N30bn Commercial Paper Programme

3.      Sell-Offs Push Secondary Market NT-Bills Average Yield 53bps Higher WoW to 1.1%

4.      Nigeria Redeems USD500m Eurobond - DMO

5.      February 2021 FGN Savings Bonds Offer for Subscription

6.      Sighs of Relief in the FGN Bond Space as Improved Local Demand Calms Market Bearishness

7.      OMO Auction: Cash Shortages in the Money Market Deters OMO T-Bills Auction Buyers

8.     Nigeria Mortgage Refinance Company Plc Lists N10.00bn Fixed Rate Bond on FMDQ Exchange

9.      Relentless Bears Continue to Tighten the Grip on the FGN Bond Market

10.  Flour Mills of Nigeria Plc Joins Other Corporates to Float Bond on FMDQ Exchange Platform in 2021


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd. 


READ MORE:
Related News
SCROLL TO TOP