CBN Excludes Local Investors from Participating at OMO Auctions

Proshare

Thursday, October 24, 2019 / 4:02 PM / By Zedcrest Capital / Header Image Credit: Business Post


As a follow up to the circular released last week, the CBN issued a notice to banks effectively excluding local individuals and corporates from participating at the OMO auction from henceforth. While the Apex bank's motive for these changes remains unclear, we note this "ban" doesn't preclude foreign portfolio investor participation at the OMO auction window.

 

With an OMO auction expected tomorrow, to mop up maturities of c.N326bn, we expect a drop in subscription levels as a fallout from this directive. We also expect yields to drop in reaction as demand from local investors, especially PFAs, will flow into the secondary market.

 

At the Primary Auction, the DMO raised a total of N139.81bn (c.N10bn less than the initial amount offered) despite healthy demand across all three tenors offered. Strong demand was in the wake of bond maturities, largely skewered towards the 10-year (2029 re-opening) maturity with a bid-to-cover ratio of 2.40X. The stop rates crashed lower than the previous auction by c.19bps on the average across the three offered tenors.

 

We expect to see a pick-up in secondary market activity as investors look to cover lost bids and rollover the balance of maturities paid today. We also expect an uptick in yields at the long-end of the curve as the 2034 - 2037 maturities reprice closer to the 30-year (2049 re-opening) levels.

 

Below are highlights of activities in the fixed income and forex market on October 23, 2019

 

Bonds

The Bond market has a quiet trading session as the monthly FGN bond auction took center stage. We witnessed some order-driven trades, with very little volumes passed, as investors looked to reinvest bond maturities received today at the bond auction.

 

FGN Bonds - 23 October 2019

Maturity

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn) 

Apr-23

14.05

50.00

63.67

29.11

Apr-29

14.233

50.00

119.78

64.40

Apr-49

14.60

50.00

72.54

46.30


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.12

13.62

(0.07)

16.39 27-Jan-22

14.09

13.70

0.00

12.75 27-Apr-23

14.20

14.09

0.00

14.20 14-Mar-24

14.16

13.88

0.00

13.53 23-Mar-25

14.24

14.06

0.00

12.50 22-Jan-26

14.22

14.04

0.00

16.29 17-Mar-27

14.21

14.06

0.01

13.98 23-Feb-28

14.24

14.03

(0.01)

12.15 18-Jul-34

14.28

14.10

0.00

12.40 18-Mar-36

14.29

14.15

0.00

16.2499 18-Apr-37

14.25

14.15

0.00

14.80 26-Apr-49

14.60

14.51

0.04


Source: Zedcrest Dealing Desk


Treasury Bills

Activity in the Nigerian T-bills market picked-up with mixed sentiments witnessed at various segments of the NTBills curve. While strong sell-offs were noted on short-dated papers, demand remained for maturities around the 182- to 270-DTM mark while the long-end of the curve saw improved offers with little volumes passed. Yields consequently closed higher by c.15bps on the average across the benchmark NTBills curve.

  

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Nov-19

12.40

12.00

0.40

5-Dec-19

12.40

11.45

0.40

2-Jan-20

12.50

11.25

0.50

6-Feb-20

12.50

11.25

0.50

19-Mar-20

12.25

10.50

0.35

2-Apr-20

12.45

11.30

(0.05)

14-May-20

12.35

11.75

(0.15)

04-Jun-20

12.45

11.65

(0.05)

02-Jul-20

12.70

12.25

(0.10)

13-Aug-20

12.85

12.45

0.00

3-Sep-20

12.90

12.70

0.00

1-Oct-20

13.00

12.70

0.00

Source: Zedcrest Dealing Desk

 

Money Market

Money market rates slightly dropped by an average of c.100bps from yesterday's trading, bond maturities improved system liquidity. System Liquidity is estimated to have closed at c.N450bn as OBB and OVN rates closed today at 3.50% and 4.36% respectively. 

We expect rates to still remain at single digits as OMO maturities of c.N326bn further increase market liquidity.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

3.50

4.43

Overnight (O/N)

4.36

5.00

 Source: FMDQ, Zedcrest


FX Market

At the interbank, the Naira/USD spot and SMIS rates remained unchanged at N306.95/$ and N358.13/$ respectively. The I&E FX window closing rate marginally depreciated by 1k to close at N362.12$.

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

362.12

362.11

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 on bearish sentiments as rates across the sovereign yield curve inched up by c.4bps. The Brent crude oil prices dropped by an average of c.10bps which impacted the sell-off across the sovereign curve. 

We saw an uptick in trading activity in the NIGERIA Corps, as local investors looked to reinvest coupons paid recently on the ACCESS 21, FIDBAN 22 and ETINL 24 papers last week. We noted demand for most of the tracked papers as the ACCESS 21, UBANL 22 and FIDBAN 22 papers all strengthened by +29bps, +24bps, and +23bps respectively.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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