DMO Comfortably Raises N390.70Bn At The FGN Bond Auction As Local Demand Swells

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Thursday, May 21, 2020 /  07:42 AM / by Zedcrest Capital / Header Image Credit: Financial Brokerage


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FGN Bonds

The Bond Market had a sluggish open as attention shifted to the monthly FGN bond auction. Activity picked up as we saw decent demand on some of the bonds with decent offers, particularly the 2024s, 2028s and 2049s maturities as few investors took advantage of the toned-down market to cherry-pick these interesting maturities. Yields dropped by c.22bps on the average across the benchmark bond curve.

At the Primary Auction, the DMO raised a whooping N390.70bn (394% more than the amount offered) with a very healthy demand seen across all three tenors offered. Demand was largely skewered towards the 15-year (2035 re-opening) and the 30-year (2050 re-opening) maturities with a bid-to-offer ratio of 7.71X and 9.46X respectively. The stop rates crashed unexpectedly on the 15-year dropping by 30bps will the other two auction bonds jerked up by an average of c.15bps compared to the previous auction rates.

We expect to see a pick-up in secondary market activity as investors look to cover lost bids, especially on the 2035s, though this might be tapered due to further issuances of FGN Sukuk expected by the DMO soon. We also expect an uptick in yields at the long-end of the curve as the 2034 - 2049 maturities reprice closer to the auction levels.

 

                    FGN Bonds Auction Result- May. 20, 2020

Maturity

Rate (%)

Offer (₦'bn)

Sub (₦'bn)

Sold (₦'bn) 

Non-Comp. (₦'bn) 

Apr-23

9.20

20.00

81.89

67.37

20.00

Mar-35

11.70

20.00

154.10

68.73

74.50

Apr-50

12.60

20.00

189.19

160.10

0.00

 

                          Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

7.97

4.84

(0.90)

 

16.39 27-Jan-22

9.16

5.35

(0.01)

 

12.75 27-Apr-23

9.36

8.43

(0.57)

 

14.20 14-Mar-24

9.41

8.42

(0.30)

 

13.53 23-Mar-25

9.10

8.63

(0.48)

 

12.50 22-Jan-26

10.58

10.02

(0.46)

 

16.29 17-Mar-27

11.16

10.44

0.00

 

13.98 23-Feb-28

11.22

10.83

0.00

 

14.55 26-Apr-29

11.29

10.98

0.00

 

12.15 18-Jul-34

11.65

11.15

(0.06)

 

12.40 18-Mar-36

11.69

11.33

(0.06)

 

16.2499 18-Apr-37

11.69

11.29

(0.03)

 

14.80 26-Apr-49

12.54

13.42

(0.05)

 

 

Treasury Bills

Activities in the Treasury bills market picked-up slightly with mixed sentiments witnessed at various segments of the curve. While we saw more offers on the short-dated OMO papers (July – October), demand remained strong for longer-dated papers (especially from Jan to March). Yields continued to depress across the OMO curve, compressing further by an average of c.83bps.

In the NTB space, offers remained very scarce with a few trades on 31 May maturity crossed around 2.95%.

We expect the market to choppy, as the CBN keeps its supply window for OMOs shut.

 

                      Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOM 6/4/2020

5.00

1.50

0.00

NGOM 7/2/2020

7.00

1.50

(1.00)

NGOM 8/13/2020

7.00

1.50

(1.00)

NGOM 9/3/2020

7.00

1.50

(1.00)

NGOM 10/1/2020

7.00

1.50

(1.00)

NGOM 11/03/2020

7.00

1.50

(1.00)

NGOM 12/01/2020

8.00

1.50

(1.00)

NGOM 01/05/2021

9.00

3.00

(0.75)

NGOM 02/02/2021

9.00

2.00

(0.75)

NGOM 03/02/21

9.00

2.00

(0.75)

 

 

                           Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 2-Jul-20

4.00

0.10

0.00

NIGTB 1-Oct-20

4.00

0.10

0.00

NIGTB 12-Nov-20

4.00

0.10

0.00

NIGTB 14-Jan-21

5.00

0.20

0.00

NIGTB 11-Feb-21

5.00

0.20

0.00

 

Money Markets

System liquidity opened with c.497.32bn positive, as interbank rates remained firmly in the single-digit corridor. OBB and OVN rates closed at 1.67% and 2.17% respectively with no significant change compared to yesterday.


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We expect rates to stay around this low level for tomorrow's session, with funding pressures expected at the end of the wake to take rates up.

 

                          Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

1.67

1.90

Overnight (O/N)

2.17

2.30

 

FX Market

At the Interbank, the Naira/USD spot and SMIS rate remained unchanged at N361/$ and N380.69/$ respectively. At the I&E FX window, the Naira depreciated against the dollar slightly by 9kobo to close at N386.42/$ as activity picked up at the window following the CBN's Wholesale intervention supply the day before.

At the parallel market, cash rates depreciated by N5.00k to close at N460.00/$, while the transfer rate remained unchanged.

  

                               FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

361.00

361.00

CBN SMIS

380.69

380.69

I&E FX Window

386.42

386.33

Cash Market

460.00

455.00

Transfer Market

470.00

470.00

 

Eurobonds

The NGERIA Sovereigns continued to see healthy demand as oil price remained strong at its levels (2.78% D/D gain). The 2031s and 2049s papers remain the heart of the market, witnessing most investor interest as yields compressed further by c.31bps on the average across the sovereign curve.

 

Similarly, the NGERIA Corps tickers traded on a bullish note, as demand persisted among most tracked papers. The Zenith 2022s and UBANL 2022s led the pack, gaining 28bps and 15bps respectively.


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