Bond Yields Cross Above 11.00% As Market Remains Weak Ahead of Monthly Auction

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Tuesday, February 16, 2021 / 8:37 AM / By Zedcrest Capital / Header Image Credit: Getty Images


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FGN Bonds

The FGN Bonds market opened the week on a calm note, even as yields pulled back as market participants positioned against the monthly FGN Bond auction scheduled for later this week. We noted continued supply concentrated at the belly of the bond curve, most especially the 2028s paper which had its yield close higher by 16bps. At the tail end of the curve, the 2035s made the biggest moves as suppliers looked to try to sell in anticipation of higher rates at the primary auction. The 2049s broke the 11.00% support level, trading comfortably at 11.05% during today's session. Yields expanded further by c.4bps on the average across the benchmark curve at the close of trading.

 

With the latest monthly inflation figure expected to post higher, we expect another weak trading session tomorrow as investors remain focused on the coming bond auction.

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

8.16

7.50

(0.25)

14.20 14-Mar-24

9.00

7.75

(0.24)

13.53 23-Mar-25

9.47

8.41

0.14

12.50 22-Jan-26

10.28

9.64

(0.10)

16.29 17-Mar-27

10.79

10.02

0.14

13.98 23-Feb-28

10.81

10.28

0.16

14.55 26-Apr-29

10.80

10.31

0.15

12.15 18-Jul-34

11.00

10.70

0.00

12.50 27-Mar-35

11.30

10.42

0.30

12.40 18-Mar-36

11.15

10.53

0.15

16.2499 18-Apr-37

11.13

10.52

0.13

9.80 24-Jul-45

11.50

10.34

0.00

14.80 26-Apr-49

11.26

11.00

0.00

12.98 27-Mar-50

11.22

10.95

0.00

 

Treasury Bills

Trading in the secondary market for Treasury Bills stalled for the first trading session of the week, as local banks remain wary of taking on risk at single-digit levels preferring to wait for better rates at the primary auction (OMO) expected late in the week. Rates remained unchanged at the close of the trading session.

 

The jury remains out on whether the CBN is done with its rate hikes for OMO auctions with the reduction in the spread between the NAFEX close rates 1-year OTC FX Futures rates pricing in only a 10.00% yield pickup we expect offshores to continue to demand higher rates and IEFX closing rates.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 03/02/21

7.00

0.03

0.00

NGOMOB 0 05/11/21

7.50

0.03

0.00

NGOMOB 0 06/08/21

8.25

0.04

0.00

NGOMOB 0 08/10/21

8.25

0.04

0.00

NGOMOB 0 09/07/21

9.00

0.04

0.00

NGOMOB 0 10/19/21

10.00

0.05

0.00

NGOMOB 0 11/02/21

10.50

0.05

0.00

NGOMOB 0 12/07/21

10.50

0.05

0.00

NGOMOB 0 01/13//22

10.50

0.05

0.00

 

Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 02/11/21

6.50

0.03

0.00

NIGTB 0 03/11/21

6.50

0.03

0.00

NIGTB 0 04/29/21

6.50

0.03

0.00

NIGTB 0 05/13/21

7.00

0.03

0.00

NIGTB 0 06/10/21

7.50

0.04

0.00

NIGTB 0 07/01/21

7.50

0.04

0.00

NIGTB 0 08/26/21

7.50

0.04

0.00

NIGTB 0 09/09/21

8.50

0.04

0.00

NIGTB 0 10/14/21

9.00

0.05

0.00

NIGTB  0 11/11/21

9.50

0.05

0.00

NIGTB  0 01/11/22

9.80

0.05

0.00

 


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Money Markets

Despite a c. 53% drop in system liquidity, opening today at N177Bn net positive, OBB and OVN rates remained relatively stable at 4.00% and 4.25% respectively.

 

With almost half of the interbank system liquidity funded from the CBN's Standing Lending Facility (repo), we expect a slight nudge in interbank funding rates as borrowing banks look to their more liquid counterparts to provide cheaper funding options.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

4.00

4.50

Overnight (O/N)

4.25

4.75

 

FX Market

The Naira continued to weaken at the IEFX market, depreciating 1.24% to close at a new all-year high of N409.67/$. The CBN remained out of the market for another consecutive session, instead of injecting its usual daily flow of liquidity into the market via sales to banks.

 

At the parallel market, the cash rate followed suit losing 0.11% (N0.50k) D/D to close at N474.00/$ while the transfer rate remained stable at N489.00/$.

FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

409.67

404.67

Cash Market

474.00

473.50

Transfer Market

489.00

489.00

 

 

Eurobonds

Continued Oil gains (c.4%) spurred had little-to-no effect on the NIGERIA Sovereign bonds as investor interest varied across the curve, a similar pattern seen in a generally flat session in the SSA Space mostly due to the U.S. bank holiday. Yields remained largely unchanged across the sovereign curve.

 

The NGERIA Corps were however significantly bearish, with selling interests seen across most tracked tickers - ACCESS 21s, UBANL 22s, FIDBAN 22s, SEPLLN 23s and ETINL 24s.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd. 


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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