Bond Yields Push Higher As GDP Weakens By 6.10% YoY

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Tuesday, August 25, 2020 / 8:01 AM / By Zedcrest Capital / Header Image Credit: Forbes


Proshare Nigeria Pvt. Ltd.


FGN Bonds

The FGN bonds market opened the week to the news of negative growth for Nigeria's GDP (-6.10% YoY). This compounded an already weak market, still reeling from the previous week's primary auction. We noted offers across the benchmark curve all session, but with no matching bids as investors continue to sit on the sidelines. Even offers at the long-end at 10.00% levels were not seen as enticing enough to bring client demand. Consequently, yields expanded by c.25bps on the average across the bond curve.

We remain cautious to label the current market weakness as bearish as we expect demand from local investors to improve in the coming weeks as their liquidity positions improve from OMO maturities and FGN Bond coupon payments start rolling in.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

16.39 27-Jan-22

5.94

2.97

(0.02)

 

12.75 27-Apr-23

7.29

5.05

0.38

 

14.20 14-Mar-24

7.08

4.89

(0.01)

 

13.53 23-Mar-25

7.50

4.90

0.46

 

12.50 22-Jan-26

7.27

6.49

0.39

 

16.29 17-Mar-27

8.26

7.48

0.15

 

13.98 23-Feb-28

8.49

7.52

0.46

 

14.55 26-Apr-29

9.12

8.24

0.34

 

12.15 18-Jul-34

10.05

9.41

0.30

 

12.40 18-Mar-36

10.28

9.53

0.20

 

16.2499 18-Apr-37

10.27

9.57

0.17

 

14.80 26-Apr-49

10.28

9.87

0.12

 


Treasury Bills

On the flip side, ample system liquidity pushed activities in the OMO bills in one direction as demand continued to outweigh supply. Bid/Offer spreads remained wide, around 50bps apart on the average across the benchmark curve. We noted bids for the short-dated papers (Nov.-Dec.) at 3.30% levels with offers at 3.00% while at the long end (Jun.-Aug. maturities) bids at 3.90% levels remained unmatched as offers were stable in the mid-3% range.

We expect activity to improve in tomorrow's session as the bids should improve downwards to match the offer levels.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 9/3/2020

4.50

0.01

0.00

NGOMO 10/1/2020

4.50

0.01

0.00

NGOMO 11/03/2020

5.00

0.01

0.00

NGOMO 12/01/2020

5.00

0.01

0.00

NGOMO 02/02/2021

5.50

0.01

0.00

NGOMOB 0 03/02/21

6.00

0.01

0.00

NGOMOB 0 05/11/21

6.00

0.01

0.00

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 10/1/2020

2.50

0.01

0.00

NIGTB 11/12/2020

3.00

0.01

0.00

NIGTB 01/14/2021

3.00

0.01

0.00

NIGTB 02/11/2021

3.50

0.01

0.00

NIGTB 04/29/2021

3.50

0.01

0.00

NIGTB 05/13/21

4.00

0.01

0.00

NIGTB 06/10/21

4.00

0.01

0.00

 

Money Markets

The Money Markets resumed right where it left last week, as rates remained stable amidst ample system liquidity boosted by FGN Bon coupon payments of c.N49.89Bn. Consequently, OBB and OVN rates closed at 2.00% and 3.00% respectively.

With more liquidity expected later in the week via OMO maturities, we expect rates to remain stable in the low single-digit range.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

2.00

2.00

Overnight (O/N)

3.00

2.63

  

FX Market

The FX market has slumped back into its lull, with not much activity recorded in today's session. The I&E FX Market volumes closed at $7.19mio, an 88% decrease from last week's close, while the rates close unchanged at N386.00/$. At the parallel market, the Cash market rate appreciated by N1.00k to close at N475.00/$ while the Transfer rate closed unchanged at N480.00/$.

 

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

381.00

381.00

CBN SMIS

380.69

380.69

I&E FX Window

386.00

386.00

Cash Market

475.00

476.00

Transfer Market

480.00

480.00

 

Eurobonds

The NGERIA Sovereigns opened the week on a stronger note, amidst general positivity seen in the sub-Sharan sovereign space. Consolidated increase in global oil prices boosted the sovereign papers, as demand hit the streets mostly from offshore players. Yields contracted by c.4bps on the average across the curve by the close of trading. In the SSA space, ANGOLA and EGYPT sovereign papers led the rally, as prices gained +25cents each while the ZAMBIA papers were the day's losers following the sack of a market-friendly central bank governor by President Lungu.

The NGERIA Corps tickers had a more quiet session, with offers for ACCESS 2021s, FIDBAN 2022s, and SEPLLN 2023s in the streets all day seeing a lack of interests. The ETINL 2024s paper continues to remain scarce with the market all out of supply for that paper.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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