FGN Bonds Market Closed the Week on a Negative Note as T-Bills Secondary Market Took a Backseat

Proshare

Sunday, February 14, 2021 09:00 AM / by Zedcrest Capital  Header Image Credit: Capital



Below are highlights of trading activities in the fixed income and forex market on  February 12, 2021.

 

 

FGN Bonds

The FGN Bonds market closed the week on a negative note, as the market continued to demand for higher yields in response to the sustained increase in short-term interest rates. We witnessed supply across the bond curve, with sellers hitting any bid available. Yields on the mid-tenor papers (2026s to 2029s) moved higher by 15bps on the average, with bids peaking at 10.65% on those papers. The papers at the long-end tested the 11.00% levels, after initial trades happened at between 10.90% to 10.95% earlier in the trade session. Yields expanded by c.8bps on the average across the benchmark curve at the close of trading.

 

We expect the upward pressure on bond yields to be sustained in the coming week, as investors remain weary of taking on duration amidst expectations for continued volatility.

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

8.41

6.76

(0.68)

14.20 14-Mar-24

9.24

7.46

0.35

13.53 23-Mar-25

9.33

8.41

0.00

12.50 22-Jan-26

10.38

9.70

0.14

16.29 17-Mar-27

10.65

10.02

0.15

13.98 23-Feb-28

10.65

10.31

0.15

14.55 26-Apr-29

10.65

10.24

0.04

12.15 18-Jul-34

11.00

10.45

0.16

12.50 27-Mar-35

11.00

10.44

0.15

12.40 18-Mar-36

11.00

10.40

0.15

16.2499 18-Apr-37

11.00

10.43

0.15

9.80 24-Jul-45

11.50

10.34

0.30

14.80 26-Apr-49

11.26

10.82

0.06

12.98 27-Mar-50

11.22

10.72

0.02

 

Treasury Bills

The secondary market of Treasury Bills took a backseat in today’s trading session, as all eyes were on the primary market auction. Offers were seen across the NTB and OMO curves, but with no bid interests could be firmed up. Reflecting the uncertainty of the DMO’s auction, spreads widened on the average rising by c.36%bps on the average across the benchmark bills curves.

 

At the Primary Market, pressures from investors for higher interest rates bided proved too much for the DMO as it struggled to keep a handle on single-digit borrowing rates. Demand at the auction was weak, with a much wider range of bids as investors were expectant the NTB rates will follow the precedent set by the CBN at last week’s c438bps average rise in OMO stop rates. The DMO managed some of the pressure by moving more volumes to shorter-dated tenors and redeeming a portion of the 364-day maturing bills. The stop rates eventually closed higher by c.45bps, c.70bps and 200bps to close at 1.00%, 2.00% and 4.00% for the 91-, 182- and 364-day tenors.

 

We expect a more volatile trading session tomorrow, as the market attempts to price-in the effects of consecutive rate hikes at the last two primary auctions.

 

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

System liquidity improved opening today, as the market opened at N486Bn net positive (c.71% higher D/D). OBB and OVN rates consequently crashed further by 350bps on the average to close at 5.00% and 5.25% respectively.

 

We expect interbank rates to oscillate in tandem to the system liquidity tomorrow, with pressure expected from the weekly anticipated OMO auction.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

5.33

5.33

Overnight (O/N)

5.83

5.83

 

FX Market

Traded volumes lower at the IEFX market remained stable D/D, with the Naira still trading above the N400.00/$ at the official windows (the first traded at these levels in the official markets so far this year). The parallel market stabilized a bit from the recent moves in rates, with cash and transfer rates closing unchanged at N473.50/$ and N489.50/$ respectively.


FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

400.00

400.00

Cash Market

473.50

468.00

Transfer Market

489.00

489.00

 

 

Eurobonds

The NGERIA Sovereigns received a return of positive flows in today’s session, as yields across the sovereign curve compressed by c.2bps on the day. The newly issued Egypt papers started its open trading on a positive note, with prices improved by 0.75c on the average at the session’s open similar to the gains witnessed across most of the SSA Sovereigns Space.

 

The issuance of the new Ecobank Nigeria Limited dominated most of the attention of the trading session of the NIGERIA Corps as most tracked papers faced selling pressures most especially the related ETINL 2024s paper which saw its yield rise c.28bps at the close. The Ecobank issue was highly successful, with being oversubscribed by 3X, as the bank stuck to is planned issuance amount of $300mio closed at 7.125% yield for the 5-year bond. This high unmet demand should push the bond to open on a positive note.



Proshare Nigeria Pvt. Ltd.


 

 Proshare Nigeria Pvt. Ltd.


 

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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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