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Bonds Remained the Toast of Fixed Income Investors, As OMO Restrictions Crippled T-Bills Market

Bonds & Fixed Income	889 VIEWS
Bonds & Fixed Income
889 VIEWS

Sunday, October 27, 2019 / 06:02 PM / By Zedcrest Capital / Header Image Credit: This Is Money

Below are the highlights of trading activities in the fixed income and forex market on October 25, 2019

Bonds

The Bond market maintained its bullish run to close the week, fueled by local demand as investors reacted to the new CBN's OMO regulations. Yields closed the session down by c.17bps on the average across the benchmark bond curve, with the most active papers the 2029s and 2049s maturities.

We maintain a bullish outlook for bonds in the interim, as local investors look to bonds as alternative assets in light of restrictions on OMO securities by the CBN.

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
14.50 15-Jul-21	13.65	13.15	(0.47)
16.39 27-Jan-22	13.82	13.18	(0.29)
12.75 27-Apr-23	13.86	13.18	(0.19)
14.20 14-Mar-24	13.72	13.26	(0.15)
13.53 23-Mar-25	14.01	13.52	(0.13)
12.50 22-Jan-26	14.00	13.61	(0.19)
16.29 17-Mar-27	14.06	13.85	(0.13)
13.98 23-Feb-28	14.05	13.80	(0.11)
12.15 18-Jul-34	14.19	13.86	(0.06)
12.40 18-Mar-36	14.08	13.89	(0.12)
16.2499 18-Apr-37	14.15	13.80	(0.10)
14.80 26-Apr-49	14.47	14.23	(0.11)

Source: Zedcrest Dealing Desk

Treasury Bills

Trading in the T-bills market was muted, with little volumes passed through. As market participants digested the implications of the CBN's directive on OMO auctions, we noted few trades executed on mostly NTBills issued at Primary Market Auctions. Quoted spreads on widened reflecting the uncertainty in the markets.

We expect rates to drop in the interim, as focus shifts to the next Primary Auction scheduled for next week.

Benchmark Treasury Bills
Description	Bid (%)	Offer (%)	Day Change (%)
14-Nov-19	12.50	10.50	0.40
5-Dec-19	12.50	11.60	0.40
2-Jan-20	12.50	11.00	0.00
6-Feb-20	12.50	11.00	0.30
19-Mar-20	12.20	10.00	0.10
2-Apr-20	12.50	11.00	0.20
14-May-20	12.00	10.80	(0.30)
04-Jun-20	12.45	11.25	0.15
02-Jul-20	12.95	10.50	0.30
13-Aug-20	12.90	12.00	0.00
3-Sep-20	13.00	12.20	(0.20)
1-Oct-20	13.00	11.00	(0.15)

Source: Zedcrest Dealing Desk

Money Market

Money market rates traded slightly higher from yesterday's close, as banks made provision for Bond and Retail FX debits. OBB and OVN rates closed at 6.00% and 6.86% respectively, with market liquidity estimated to close the week at c.N450bn.

We expect rates to trade in tandem with system liquidity in the coming week, with funding pressures expected from Wholesale FX provisions to start the week.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	6.00	4.07
Overnight (O/N)	6.86	4.79

Source: FMDQ, Zedcrest

FX Market

At the interbank, the Naira/USD spot and SMIS rates remained unchanged to close the week at N306.95/$ and N358.13/$ respectively. The I&E FX window closing rate appreciated by 6k to close at N362.11$.

The Naira remained stable at the parallel markets, as both the cash and transfer rates closed unchanged

at N358.00/$ and N362.50/$ respectively.

FX Market
	Current (N/$)	Previous ( N/$)
CBN Spot	306.95	306.95
CBN SMIS	358.13	358.13
I&E FX Window	362.11	362.17
Cash Market	358.00	358.00
Transfer Market	362.50	362.50

Source: CBN, FMDQ, REXEL BDC

Eurobonds

The NGERIA Sovereigns closed the week on a positive note, as demand for the sovereign paper saw yields close lower by c.11bps on the average across the curve. The highest gains were noted on the 2023 (+15bps), 2032 (+14bps) and 2047 (+16bps).

Demand interest for NGERIA Corps papers softened in today's session. Demand was noted on the SEPPLN 2023 paper which closed lower by 3bps, while the UBANL 2022s reversed some previous gains and closed the week c.8bps higher.

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