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Double CRR Debit by The Apex Bank Significantly Crushed Liquidity in The Interbank Market

Bonds & Fixed Income	1108 VIEWS
Bonds & Fixed Income
1108 VIEWS

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Sunday, January 10, 2021 / 6:37AM / Zedcrest Capital / Header Image Credit: Brandspur

Below are highlights of trading activities in the fixed income and forex market on January 08, 2021.

FGN Bonds

The FGN bond market closed the week on a very drab note, picking slightly by mid-day and then halting towards the session's end. Much of today's activities focused on the curve's belly 2034s and 2035s papers particularly, with few trades settling around 8.05% singly. Market participants didn't leave out the 2049s bond during today's session as we saw high and lows of 8.10% and 8.02%, although tiny volumes traded within this range.

At the short end of the curve, 2026s and 2027s papers were largely bided with very few offers to match the trade. At the earlier hours of the day, we saw quotes kick-off at 6.40%/6.30% on the 26s paper but squeezed slightly towards the end of the trading session closing the day 6.32%/6.25%. The 2027s, on the other hand, was bided all day at 6.50%.

We expect activities to pick slightly next week as inflows from FGN bond coupon payment trickle into the market.

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
16.39 27-Jan-22	3.10	0.05	(0.03)
12.75 27-Apr-23	5.23	2.96	(0.01)
14.20 14-Mar-24	5.47	3.99	(0.01)
13.53 23-Mar-25	6.84	4.49	0.34
12.50 22-Jan-26	6.99	6.00	(0.01)
16.29 17-Mar-27	7.87	6.00	(0.01)
13.98 23-Feb-28	8.31	6.30	0.31
14.55 26-Apr-29	8.50	7.00	0.00
12.15 18-Jul-34	9.00	7.80	0.29
12.50 27-Mar-35	9.00	7.80	0.24
12.40 18-Mar-36	9.00	7.80	0.22
16.2499 18-Apr-37	9.00	7.80	0.00
9.80 24-Jul-45	10.00	7.20	0.00
14.80 26-Apr-49	10.00	8.00	0.00
12.98 27-Mar-50	10.00	8.00	0.00

Treasury Bills

At the Treasury bills space, trade volumes dwindle, especially after the Apex bank's double CRR debit and bi-weekly FX retail intervention funding in the interbank market, which consequently crashed market liquidity. However, we saw a few market interests on the March-June bill, primarily order-driven trading within the range of 0.15%-0.70%. We also saw few market interests on the newly issued one-year OMO bill (04th Jan 2021bill), starting at 2.60% bid but compressed by approximately 60bps with no matching offer. However, Jan 2021 tighten at 2.00%/1.70% by the close of business, making it difficult to seal.

We expect the treasury bills market to pick slightly next-week as participants recover from their heavy CRR debit of over N600BN by the Apex bank at the interbank market.


Benchmark OMO Bills
Description	Bid (%)	Offer (%)	Day Change (%)
NGOMOB 0 02/02/21	4.00	0.20	0.00
NGOMOB 0 03/02/21	4.00	0.20	0.00
GOMOB 0 05/11/21	5.00	0.30	0.00
NGOMOB 0 06/08/21	5.00	0.30	0.00
NGOMOB 0 08/10/21	6.00	0.35	0.00
NGOMOB 0 09/07/21	8.00	0.50	0.00
NGOMOB 0 10/19/21	8.00	0.65	0.00
NGOMOB 0 11/02/21	8.00	0.50	0.00
NGOMOB 0 12/07/21	8.00	0.50	0.00
Benchmark NTBills
Description	Bid (%)	Offer (%)	Day Change (%)
NIGTB 0 01/14/21	4.00	0.15	0.00
NIGTB 0 02/11/21	4.00	0.20	0.00
NIGTB 0 03/11/21	4.00	0.30	0.00
NIGTB 0 04/29/21	5.00	0.30	0.00
NIGTB 0 05/13/21	5.00	0.30	0.00
NIGTB 0 06/10/21	6.00	0.35	0.00
NIGTB 0 07/01/21	6.00	0.35	0.00
NIGTB 0 08/26/21	6.00	0.35	0.00
NIGTB 0 09/09/21	8.00	0.50	0.00
NIGTB 0 10/14/21	8.00	0.65	0.00
NIGTB 0 11/11/21	8.00	0.50	0.00
NIGTB 0 01/14/21	4.00	0.15	0.00
NIGTB 0 02/11/21	4.00	0.20	0.00

Money Markets

It was significant chaos in the interbank space despite the market opening at over N1trillion positive. Shortly into the day, The Apex hit the market with a CRR debit of over N400bn and then after another N200Bn totaling over N600BN overall debit. This is aside from the much expected bi-weekly retail intervention funding provision made by most banks in the market. As a fall of these debits. OBB and OVN jumped significantly above 800% to close the day at 8.00% and 9.30%, respectively.

We expect the interbank market to normalize in the early part of next week, albeit with rates slightly above 1%, as there are no significant funding need to push rates further north.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	8.00	0.38
Overnight (O/N)	9.30	0.75

FX Market

Transaction volumes remained very weak in the IEFX window, with shallow volumes passing through the market, albeit the Naira appreciated N0.17k. Most banks remained bided for most of the trading session between N385.00/$ and N413.00/$ while all other market segments remained stable compared to yesterday's closing.

FX Market
	Current (N/$)	Previous (N/$)
CBN Spot	379.00	379.00
CBN SMIS	380.69	380.69
I&E FX Window	393.50	393.67
Cash Market	470.00	470.00
Transfer Market	484.00	484.00

Eurobonds

The NIGERIA Sovereigns closed the week on a strong note with more aggressive bids shown across the curve riding on the continuing rebound in oil prices, which crossed $55 in the international market (Brent Crude). We saw the most significant movement in yields at the belly of the curve for the 2027s-2031s papers, which gained a c.16bps D/D average. By and large, yields compressed by an average of c.9bps across the sovereign curve.

The NIGERIA Corps had a quiet session, albeit large movement in yield for the SEPPLN 22s, which compressed by c.248bps compared to yesterday's closing.

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