Bullish Run Continues Ahead of Bond Auction and Maturity Double Header

Proshare

Wednesday, October 23, 2019 / 08:50 AM / By Zedcrest Capital / Header Image Credit: Investing.com


Below are highlights of trading activities in the fixed income and forex market on October 22, 2019

Bonds

The bullish run in the Bonds market continued for another consecutive session, most notably at the long-end of the curve. We witnessed investor's preference for yields over duration available at the long end of the curve, most notably the 2034s and 2037s which strengthened by +5bps and 12bps respectively.  Rates dropped by an average of c.1bps across the benchmark bond curve.

 

We expect this bullish trend to feed into the bond auction coming up tomorrow to push stop rates lower across all offered tenors, as maturities of c.N234bn come in.

 

FGN Bond Auction Expectation - 25 October 2019

Maturity

Offer (N'bn)

Stop Rate Expectation (%)

Apr 2023

50.00

14.10 - 14.25

Apr 2029

50.00

14.15 - 14.30

Apr 2049

50.00

14.40 - 14.55



Proshare Nigeria Pvt. Ltd.


Source: Zedcrest Dealing Desk



Treasury Bills

The Nigerian T-bills market opened on a bullish note as expected, as we noted interested buyers across the NTBills curve as rates dipped by an average of c.8bps across the benchmark curve. Significant volumes were passed most notably on the 08-Oct-20 maturity (re-issued at the previous day's OMO auction), which closed c.35bps lower from yesterday's stop-rate. 

We expect the bullish trend to taper opening tomorrow's session as investors weigh the possibility of another OMO auction by the CBN to mop up bond maturities.


Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Nov-19

12.00

10.50

0.00

5-Dec-19

12.00

11.10

0.00

2-Jan-20

12.00

10.75

(0.25)

6-Feb-20

12.00

11.10

(0.25)

19-Mar-20

11.90

10.50

(0.10)

2-Apr-20

12.50

11.40

(0.10)

14-May-20

12.50

11.75

0.50

04-Jun-20

12.50

11.50

(0.30)

02-Jul-20

12.80

12.05

(0.10)

13-Aug-20

12.85

12.40

(0.15)

3-Sep-20

12.90

12.25

(0.10)

1-Oct-20

13.00

12.25

0.00

Source: Zedcrest DealingDesk

 

Money Market

Money market rates dropped by an average of c.300bps from yesterday's close. Market liquidity figures opened with c.N230bn, with little funding pressures banks. OBB and OVN rates closed today at 4.43% and 5.00% respectively. 

We expect rates to remain at single digits with FGN bond and OMO maturities increasing market liquidity levels. 


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

4.43

7.21

Overnight (O/N)

5.00

7.79

Source: FMDQ, Zedcrest

 

FX Market

At the interbank, the Naira/USD spot rate depreciated by 5k to close at N306.95/$, while the SMIS rates remained stable at N358.13/$. The I&E FX window closing rate bounced back to close at N362.11$ (81k stronger from yesterday's close).

The Naira remained stable at the parallel markets, as both the cash and transfer rates remained stable at N358.00/$ and N362.50/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.90

CBN SMIS

358.13

358.13

I&E FX Window

362.11

362.92

Cash Market

358.00

358.00

Transfer Market

362.50

362.50


Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

In today's trading session, the NGERIA Sovereign papers traded with mixed sentiments with a bearish bias. At the short-end of the sovereign curve, the NGERIA 2021 and 2023 papers strengthened by +13bps and +6bps respectively, while the rest of the curve weakened by c.4bps on the average despite gradual gains (+1.82% day-on-day) in Brent crude oil prices. 

It was a quiet trading session for the NIGERIA Corps with little activity noted on the tracked papers. We, however, noted selling interests on the SEPLLN 2023, which weakened by -11bps.

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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