FGN Bond Auction: Bond Rates Rise to 9-month High As DMO Oversells Off The Back of Strong Demand

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Thursday, March 25, 2021 / 8:37 AM / By Zedcrest Capital /Header Image Credit: Getty Images


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FGN Bonds

The FGN bonds market held its breath in today's session as traders anticipated the FGN Bond primary market auction results. Yields across the benchmark curve remained mostly unchanged from the previous day, with improved offers at the mid-to-long-end of the curve, as sentiments for a bearish auction result amplified throughout the trading session. Consequently, yields expanded by an average of c.3bps across the benchmark curve.

 

At the bond auction, the DMO raised a total of c.N262.10bn (174% of the total offered amount) across the three tenors offered with a total bid-to-cover ratio of 2.22X. The stop rates maintained the theme of rising rates so far this year, with the 25-year bond closing at 12.00% (highest since June 2020).

 

We expect a cautious trading session opening tomorrow, as the market reacts to the new supply from the auction.

 

FGN Bonds Auction Result - Mar. 24, 2021

Maturity

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn) 

Previous Rate (%)

Changes

Mar-27s

10.50

50.00

65.25

44.01

10.25

0.2500

Mar-35

11.50

50.00

110.19

86.29

11.25

0.2500

Jul-45

12.00

50.00

158.04

131.80

11.80

0.2000

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

6.95

5.75

0.00

14.20 14-Mar-24

8.70

6.70

0.00

13.53 23-Mar-25

8.50

7.20

0.00

12.50 22-Jan-26

10.25

10.00

0.00

16.29 17-Mar-27

10.40

10.05

0.00

13.98 23-Feb-28

10.45

10.10

0.00

14.55 26-Apr-29

10.65

10.35

0.10

12.15 18-Jul-34

11.60

11.30

0.00

12.50 27-Mar-35

11.65

11.30

0.05

12.40 18-Mar-36

11.65

11.35

0.00

16.2499 18-Apr-37

11.65

11.40

0.00

9.80 24-Jul-45

11.80

11.55

0.10

14.80 26-Apr-49

11.85

11.58

0.05

12.98 27-Mar-50

11.85

11.55

0.05

 

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.


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Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 05/11/21

13.00

0.01

0.00

NGOMOB 0 06/08/21

13.00

0.01

0.00

NGOMOB 0 08/10/21

13.00

0.02

0.00

NGOMOB 0 09/07/21

13.00

0.02

0.00

NGOMOB 0 10/19/21

12.00

0.02

0.00

NGOMOB 0 11/02/21

12.50

0.03

0.00

NGOMOB 0 12/07/21

12.50

0.03

0.00

NGOMOB 0 01/11/22

12.50

0.03

0.00

NGOMOB 0 02/01/22

13.00

0.03

0.00

NGOMOB 0 03/01/22

13.00

0.03

0.00

 

Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 04/29/21

13.00

0.01

0.00

NIGTB 0 05/13/21

13.00

0.01

0.00

NIGTB 0 06/10/21

13.00

0.01

0.00

NIGTB 0 07/01/21

13.00

0.01

0.00

NIGTB 0 08/26/21

13.00

0.02

0.00

NIGTB 0 09/09/21

12.00

0.02

0.00

NIGTB 0 10/14/21

12.00

0.02

0.00

NIGTB 0 11/11/21

11.00

0.03

0.00

NIGTB 0 01/13/22

11.00

0.03

0.00

NIGTB 0 02/10/22

11.00

0.03

0.00

 


Money Markets

Interest rates trended northwards by about c.200bps today as naira dealers scrambled to cover their positions as the market opened in negative territory (c.N8.96Bn opening). Local banks camped at the CBN Lending and Repo windows for liquidity injection, as OBB and Overnight rates rose to close at 13.50% and 14.00%, respectively.

 

We expect funding rates to remain elevated as bond auction debits are expected to cancel out the expected liquidity injection from the FAAC payments.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

13.50

11.50

Overnight (O/N)

14.00

12.00

 

FX Market

The Naira had a relatively quiet trading session at both the official and parallel markets. At the IEFX space, we saw a slight uptick in traded volumes which increased by 4.00% D/D (c.$34.76mio traded). The Naira appreciated by N1.05k to close at N408.75/$, as bids ranged between N394.00 and N414.00 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

408.75

409.80

Cash Market

483.00

483.00

Transfer Market

497.50

497.50

 


Eurobonds

It was a typical bearish session in the NIGERIA Sovereigns, with some profit-taking action seen, especially on the mid-and long-tenor papers causing yields to expand slightly by c.4bps on the average across the sovereign curve. At the SSA space, the Angola 2025s remained weak for the second consecutive day as sellers continue to improve offers in another profit-taking driven session for the paper.

 

The NIGERIA Corps papers traded mixed, as we noted continued selloffs from local investors in preparation for the expected issue from Seplat, with significant movement seen on the FBNNL 2025s paper, which saw yields rise by -c.14bps D/D while the UBANL 2022s paper strengthened by c.13bps.

 

Proshare Nigeria Pvt. Ltd.



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