Double Whammy At the Primaries as The DMO Drops Rates At Both NTB and Bond Auctions

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Thursday, June 18, 2020 / 10:00 AM / By Zedcrest Capital / Header Image Credit: Business AM Live


Proshare Nigeria Pvt. Ltd.


FGN Bonds

The Bonds Market traded on a discreet note, as axes were few and far between across the curve. We saw some order-driven demand on specific maturities at the long-end of the curve (2036s to 2049s), as market players traded cautiously ahead of today's Bond PMA outcome with yields compressing by an average of c.1bps across the benchmark bond curve.

The bond auction took an unexpected turn, following the healthy demand seen across the three maturities offered. The DMO sold c.N66.67% of the total amount offer, slashing the stop rates by an average of c.78bps across all three tenors. Stop rates closed for 2023s, 2035s and 2050s at 8.00%, 11.00% and 12.15% respectively with an average bid-to-cover ratio of 5.45X.

We expect an early rush for bond papers in tomorrow's trading session as investors seek to cover outstanding bids from today's auction.

 

FGN Bonds Auction Result - Jun. 17, 2020

Maturity

Stop Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn) 

Previous Rate (%)

Changes

Apr-23

8.00

40.00

137.65

32.99

9.20

-1.20

Mar-35

11.00

50.00

123.56

16.22

11.70

-0.70

Apr-50

12.15

60.00

283.95

50.79

12.60

-0.45

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

6.63

4.58

(0.02)

 

16.39 27-Jan-22

7.61

5.20

(0.01)

 

12.75 27-Apr-23

9.09

8.33

0.00

 

14.20 14-Mar-24

9.05

8.30

0.00

 

13.53 23-Mar-25

8.58

7.75

0.23

 

12.50 22-Jan-26

9.89

9.34

0.20

 

16.29 17-Mar-27

10.58

10.08

(0.27)

 

13.98 23-Feb-28

10.67

10.07

0.00

 

14.55 26-Apr-29

10.89

10.42

0.00

 

12.15 18-Jul-34

11.40

11.03

0.00

 

12.40 18-Mar-36

11.23

11.04

(0.13)

 

16.2499 18-Apr-37

11.39

11.05

0.00

 

14.80 26-Apr-49

12.35

12.09

0.00

 

 

Treasury Bills

The OMO bills market remained largely offered across all tenors from local banks as well as foreign investors seeking to take profit on some shorter-dated bills in anticipation of an OMO auction tomorrow. Interestingly, we saw some bids on December and January bills which traded around lower 5.00% levels while yields closed the day flat across the benchmark curve.

At the PMA, DMO successfully rolled over the total amount offered while dropping stop rates by an average of c.21bps across the three tenors on offer. Demand remained heavy at the auction, with an average bid-to-cover ratio of c.6.36X across the three maturities.

We expect spillover of demand from today's auction especially on the mid-long end of the curve for NTB bills while investors OMO space shift focus to tomorrow's expected auction.

 

NTB Auction Results - 17 June 2020

Tenor

Rate (%)

Offer (₦'bn)

Sub (₦'bn)

Sale (₦'bn)

Previous Rate (%)

Changes

91 days

1.800

2.00

13.59

2.00

2.0000

-0.20

182 days

2.040

2.00

15.23

2.00

2.2000

-0.16

364 days

3.746

10.61

60.18

10.61

4.0200

-0.27

 

Benchmark OMO Bills

 

Description

Bid (%)

Offer (%)

Day Change (%)

 

NGOMO 7/2/2020

6.00

1.20

0.00

 

NGOMO 8/13/2020

6.00

1.20

0.00

 

NGOMO 9/3/2020

7.00

1.20

0.00

 

NGOMO 10/1/2020

7.00

1.20

0.00

 

NGOMO 11/03/2020

7.00

1.20

0.00

 

NGOMO 12/01/2020

7.00

1.20

0.00

 

NGOMO 01/05/2021

7.50

1.20

0.00

 

NGOMO 02/02/2021

5.60

1.20

0.00

 

NGOMO 03/02/21

5.60

1.20

0.00

 

 

Benchmark NTBills

 

Description

Bid (%)

Offer (%)

Day Change (%)

 

NIGTB 2-Jul-20

3.50

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

0.10

0.00

 

NIGTB 11-Feb-21

5.00

0.10

0.00

 


Money Markets

System Liquidity remained less liquid, opening with N167.58bn positive while rates increased by c.183bps. OBB and OVN closed the day at 8.17% and 8.92% respectively.
 
We expect rates to drop slightly tomorrow due to inflows from OMO maturities of N352.83 and Retail refund due to hit the interbank market tomorrow.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

8.17

6.33

Overnight (O/N)

8.92

7.08

 

FX Market

At the interbank, the Naira/USD spot and SMIS rates remained unchanged D/D at N361.00/$ and N380.69/$ respectively. At the I&E FX window, the Naira depreciated slightly against the dollar by 0.69k to close at N386.69/$.

At the parallel market, the cash and transfer rates depreciated by N3 and N2 to close at N451.00 and N455.00/$ respectively.


FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

361.00

361.00

CBN SMIS

380.69

380.69

I&E FX Window

386.69

386.00

Cash Market

451.00

448.00

Transfer Market

455.00

453.00

 

Eurobonds

The NGERIA Sovereign tickers traded on a mixed note, slightly bullish at the mid-end while the long-end of the sovereign curve remained bearish. Consequently, yields compressed slightly by an average of c.1bps across the sovereign yield curve.

The NGERIA Corps tickers traded on a rather flat note with no significant change in yield amongst the few tracked papers. Local interests remained strong on the FIDBAN 2022s paper, but with little supply to match.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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