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Bullish Run Continues Ahead of Bond Auction and Maturity Double Header

Bonds & Fixed Income	738 VIEWS
Bonds & Fixed Income
738 VIEWS

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

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.

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