FGN Bond Auction: Weak Demand Forces The DMO to Raise Stop Rates by c.254bps

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Thursday, February 18, 2021 / 9:38 AM / By Zedcrest Capital / Header Image Credit: Getty Images


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FGN Bonds

The Bond Market traded on a soft note as anticipated, as attention remained focused on today's Bond Primary Market Auction. Bids improved lightly at the long-end of the curve, with the 2049s the most active security as it crossed hands around 11.30% levels.

 

At the bond auction, the DMO sold a total of c.N80.55bn across the three maturities on offer (2027s, 2035s and 2045s), representing only 53.70% of the amount intended to raise amidst weak bid volumes, filling up the outstanding volumes with non-competitive allotment volumes of N122Bn. The DMO raised stop rates across the three tenors by 227bps, 251bps and 285bps to close at 10.25%, 11.25% and 11.80% respectively.

 

We expect the market to open tomorrow on a hushed note, as investors digest the impact of today's auction result. Yields are expected to continue to weaken, as the investors remain wary of current yields as reflected in the range of bids at the auction.

 

FGN Bonds Auction Result - Feb. 17, 2021

Maturity

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn) 

Previous Rate (%)

Change

Mar-27s

10.25

50.00

77.05

33.62

7.98

2.47

Mar-35

11.25

50.00

72.33

28.90

8.74

2.51

Jul-45

11.80

50.00

40.13

18.03

8.95

2.85

 

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

7.80

6.50

0.00

14.20 14-Mar-24

8.70

6.50

0.00

13.53 23-Mar-25

9.10

7.30

0.00

12.50 22-Jan-26

10.20

9.60

0.00

16.29 17-Mar-27

10.60

10.15

0.00

13.98 23-Feb-28

10.70

10.40

0.05

14.55 26-Apr-29

10.70

10.30

0.00

12.15 18-Jul-34

11.10

10.70

0.10

12.50 27-Mar-35

11.10

10.65

0.05

12.40 18-Mar-36

11.05

10.65

0.05

16.2499 18-Apr-37

11.05

10.70

0.00

9.80 24-Jul-45

11.15

10.80

0.00

14.80 26-Apr-49

11.35

11.10

(0.05)

12.98 27-Mar-50

11.40

11.18

(0.15)

 

Treasury Bills

The Treasury Bills market continued its quiet trend, with slight activity skewed to the short to mid-end, as market players invest excess liquidity in available OMO bills. The mid-dated papers (Aug. - Oct. 2021s maturities) saw the most activity, as rates on those papers dropped drastically to 6.50% levels. Demand for long-dated papers remained scarce most of the session as local banks remained wary of taking on duration ahead of an expected OMO auction.

 

We expect a quiet session going into tomorrow as the market focuses on the likely OMO primary auction, with the CBN poised to retain OMO rates for a third consecutive week at over 10.00% for the 1-year tenor.

 

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 03/02/21

7.00

0.03

0.00

NGOMOB 0 05/11/21

7.50

0.03

0.00

NGOMOB 0 06/08/21

8.25

0.04

0.00

NGOMOB 0 08/10/21

8.25

0.04

0.00

NGOMOB 0 09/07/21

9.00

0.04

0.00

NGOMOB 0 10/19/21

10.00

0.05

0.00

NGOMOB 0 11/02/21

10.50

0.05

0.00

NGOMOB 0 12/07/21

10.50

0.05

0.00

NGOMOB 0 01/13//22

10.50

0.05

0.00

 

 

Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 02/11/21

6.50

0.03

0.00

NIGTB 0 03/11/21

6.50

0.03

0.00

NIGTB 0 04/29/21

6.50

0.03

0.00

NIGTB 0 05/13/21

7.00

0.03

0.00

NIGTB 0 06/10/21

7.50

0.04

0.00

NIGTB 0 07/01/21

7.50

0.04

0.00

NIGTB 0 08/26/21

7.50

0.04

0.00

NIGTB 0 09/09/21

8.50

0.04

0.00

NIGTB 0 10/14/21

9.00

0.05

0.00

NIGTB  0 11/11/21

9.50

0.05

0.00

NIGTB  0 01/11/22

9.80

0.05

0.00

 


Money Markets

Interbank funding rates stayed low for the third consecutive trade session as system liquidity remained positive (opening at c.N591Bn). Overnight (O/N) and Open Buy Back (OBB) rates decreased by 50bps on the average to close at 2.00% and 2.25% respectively.

 

We expect rates to inch higher in the second half of the week as debits from FGN Bond, OMO and FX Retail auctions begin to hit the system. 

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

2.00

2.50

Overnight (O/N)

2.25

2.75

 


FX Market

The interbank I&E market remained tight to close trading today, with minimal inflows from exporters and large corporates being the main source of liquidity in the market. Market bids ranged between N390.00/$ and N423.15/$, while the closing rate closed weaker at N410.00/$.

 

The Naira also lost some value at the parallel market, as the cash and transfer rates depreciated by c.0.25% on the average to close at N474.50/$ and N490.00/$ respectively.

FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

410.00

409.67

Cash Market

474.50

473.00

Transfer Market

490.00

489.00

 

 

Eurobonds

The NIGERIA Sovereigns continued its bearish trend for a second consecutive trading session, with supply seen across the sovereign curve despite steady global oil prices. Yields went up by an average of c.10bps across the Nigerian Sovereign Yield curve. 

 

The NIGERIA Corps tickers continued to trade on a positive note, with demand flows seen across all the tracked tickers. Yields on the Access 2021s recorded the biggest drop, closing lower by c.92bps. The Zenith 2022s and UBANL 2022s followed shortly, with yields on those papers compressing by c.43bps and c.57bps respectively.


Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd. 



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