DMO Raises Rates At Monthly Auction Once Again, As Senate Approves $2.7Bn External Borrowing Plan

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Thursday, April 22, 2021 / 11:05 AM / by Zedcrest Capital Header Image CreditDMO


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FGN Bonds

Trading in the FGN market today was more active than expected, despite the monthly primary auction looming in the background. We saw improved demand at the belly and tail-ends of the bond curves, as speculators looked to pre-empt the auction rates. The 2028s and 2029s papers traded around the 12.00% mark, while the 2045s and 2049s changed hands around 13.80% levels. Yields expanded by an average of c.1bps across the sovereign bond curve, dragged slightly higher by supply seen on the 2023s and 2034s papers.

 

At the bond auction, the DMO issued a total of N274.45Bn (182.97% of the total offered amount), with a huge chunk from non-competitive bids (N116.50Bn) as investor demand was relatively poor with a bid-to-cover ratio of 1.77X. The stop rates increased by an avg. of 181bps across all tenors, as the DMO played catch up to secondary market yields which had already moved from the previous month's levels.

 

Investors' expectations for even higher yields on FGN instruments can be seen in the poor demand at today's auction, with DMO resorting to non-competitive bids to raise as much as 42% of the target amount. With the MTN Nigeria Comms. PLC 7-year bond closing at 13.00% and the continuous rise in short-term rates, we expect the current apathy towards current yield levels to persist as investors have more alternatives enabling them to remain on the sidelines.

 

 

FGN Bonds Auction Result - Apr. 21, 2021

Maturity

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn) 

Previous Rate (%)

Changes

Mar-27s

12.25

50.00

34.69

22.97

10.50

1.7500

Mar-35

13.34

50.00

56.13

38.78

11.50

1.8400

Jul-45

13.85

50.00

174.86

96.20

12.00

1.8500

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

9.50

7.00

0.35

14.20 14-Mar-24

10.00

7.30

0.00

13.53 23-Mar-25

10.50

8.90

0.00

12.50 22-Jan-26

12.00

11.60

0.00

16.29 17-Mar-27

12.40

11.90

0.00

13.98 23-Feb-28

12.55

11.95

(0.10)

14.55 26-Apr-29

12.65

11.95

(0.05)

12.15 18-Jul-34

13.40

13.10

0.05

12.50 27-Mar-35

13.40

13.00

0.00

12.40 18-Mar-36

13.40

13.00

0.00

16.2499 18-Apr-37

13.45

13.05

0.00

9.80 24-Jul-45

13.95

13.75

0.00

14.80 26-Apr-49

13.95

13.70

(0.05)

12.98 27-Mar-50

13.90

13.65

(0.10)


Treasury Bills

It was another consecutive session with muted trading activity in treasury bills space, as pressures on system liquidity continue to pressure the positions of banks. Offers remained steady across the treasury bills curve, but with no demand as local banks continued to focus on their liquidity issues.

 

We expect the CBN to float an OMO auction tomorrow, keeping in line with the recent trend, despite tight system liquidity levels.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 05/11/21

10.00

0.05

0.00

NGOMOB 0 06/08/21

10.00

0.05

0.00

NGOMOB 0 08/10/21

10.00

0.10

0.00

NGOMOB 0 09/07/21

9.00

0.10

0.00

NGOMOB 0 10/19/21

10.00

0.10

0.00

NGOMOB 0 11/02/21

10.00

0.20

0.00

NGOMOB 0 12/07/21

11.00

0.20

0.00

NGOMOB 0 01/11/22

11.00

0.20

0.00

NGOMOB 0 02/01/22

12.00

0.20

0.00

NGOMOB 0 03/01/22

12.00

0.20

0.00

 


Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 04/29/21

7.00

0.05

0.00

NIGTB 0 05/13/21

9.00

0.05

0.00

NIGTB 0 06/10/21

8.00

0.05

0.00

NIGTB 0 07/01/21

9.00

0.05

0.00

NIGTB 0 08/26/21

9.00

0.10

0.00

NIGTB 0 09/09/21

9.00

0.10

0.00

NIGTB 0 10/14/21

9.00

0.10

0.00

NIGTB 0 11/11/21

10.00

0.20

0.00

NIGTB 0 01/13/22

10.00

0.20

0.00

NIGTB 0 02/10/22

11.00

0.20

0.00

 


Money Markets

Interest rates trended northwards by about c.113bps on the average today as naira dealers scrambled to cover their positions as the market opened in deeper negative territory (c.N123.59Bn opening). Local banks camped at the CBN Lending and Repo windows for liquidity injection, increasing borrowing amounts by 69.89% D/D to c.N257Bn. Consequently, OBB and Overnight rates rose to close at 13.00% and 14.00%, respectively.

 

We expect funding rates to remain elevated as bond auction debits are expected to further pressure funding pressures on local banks.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

13.00

12.25

Overnight (O/N)

14.00

12.50

 

 

FX Market

The Naira had a relatively quiet trading session at both the official and parallel markets. At the IEFX space, Traded volumes took a dip, dropping by 60.00% D/D (c.$40.13mio traded). The Naira appreciated by N0.67k to close at N410.00/$, as bids ranged between N394.00 and N422.00 to the dollar.

 

The cash and transfer rates remained unchanged D/D.

 

 

FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

410.00

410.67

Cash Market

483.00

483.00

Transfer Market

497.50

497.50

 


Eurobonds

The market reacted negatively to reduced global oil prices (BRENT down 2.36% D/D) as well as the news of the Nigerian Senate approving the FGN's external borrowing plan of about $2.76Bn from bi-lateral lending institutions (World Bank, IMF, AFDB, and EXIM Bank of Brazil. The NIGERIA Sovereigns weakened by c.3bps on the average across the sovereign yield curve as offers on the street became more aggressive.

 

The NIGERIA Corporates provided a heaven for the volatility on their sovereign counterparts, with demand skewed towards the shorter-dated papers. The FBNNL 2025s however weakened on the day, with yields on that paper rising by 10bps D/D.


Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.



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