Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Sunday, January 24, 2021 / 6:00 AM / Zedcrest
Capital / Header Image Credit: Atlas Appraisal
Below are highlights of trading activities in the fixed income and forex market on January 22, 2021.
FGN Bonds
The
bears dominated the FGN bond market closing the week as traders remained
aggressively offered across the curve with very few bids to match. The weak
appetite for FGN bonds despite the scarcity of short-term instruments can be
attributed to the uncertainty surrounding monetary policy, which is also
further compounded by the deep negative carry on bonds at the moment (Avg. FGN
bond yields - Inflation). Most investors have resulted in staying at the short
end of the curve, pending when there is more clarity in the interest rate
environment. We believe the MPC meeting scheduled to hold next week will give
more direction, especially to long-duration investors who have been victims of
large valuation fluctuations on their trading portfolios in recent months.
We
also expect trickles of demand to flow into the bond space next week as inflows
from bond coupon payment hit the system; however, we anticipate that the market
weakness would persist in the short to medium term.
Benchmark FGN Bonds |
||||
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
|
16.39
27-Jan-22 |
3.85 |
1.30 |
0.00 |
|
12.75
27-Apr-23 |
6.00 |
4.01 |
0.00 |
|
14.20
14-Mar-24 |
6.65 |
4.00 |
0.15 |
|
13.53
23-Mar-25 |
7.04 |
5.15 |
0.00 |
|
12.50
22-Jan-26 |
7.61 |
6.52 |
0.00 |
|
16.29
17-Mar-27 |
8.61 |
7.85 |
0.00 |
|
13.98 23-Feb-28 |
8.78 |
7.80 |
0.00 |
|
14.55
26-Apr-29 |
8.83 |
7.86 |
0.00 |
|
12.15
18-Jul-34 |
10.00 |
8.87 |
0.16 |
|
12.50
27-Mar-35 |
9.96 |
8.66 |
0.11 |
|
12.40
18-Mar-36 |
9.94 |
8.80 |
0.00 |
|
16.2499
18-Apr-37 |
10.00 |
8.85 |
0.00 |
|
9.80
24-Jul-45 |
10.13 |
8.47 |
0.00 |
|
14.80
26-Apr-49 |
10.23 |
9.00 |
0.00 |
|
12.98
27-Mar-50 |
10.26 |
8.95 |
0.00 |
|
Treasury Bills
The
Treasury Bills market closed the week on a tranquil note, as bearish sentiments
stayed firm, triggered by the depressed system liquidity and profit-taking
activities by yesterday's OMO bills holders. At the early hours of trading, we
saw slight interest in the new one-year OMO bill, which traded at 2.80%.
However, as the CRR debit by the apex bank impacted the system, dealers
immediately improved their offers by about 40bps to 3.20%. Consequently, yields
across the OMO/NTB bills curve swelled by an average of 100bps.closing the
week.
However,
we expect the market to remain order-driven next week, with a slight bearish
bias as market participants seek to take profit on their positions towards
month-end.
Benchmark OMO Bills |
|||
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
NGOMOB 0
02/02/21 |
9.00 |
0.03 |
1.00 |
NGOMOB 0
03/02/21 |
9.00 |
0.03 |
1.00 |
NGOMOB 0
05/11/21 |
9.00 |
0.04 |
1.00 |
NGOMOB 0
06/08/21 |
9.00 |
0.04 |
1.00 |
NGOMOB 0
08/10/21 |
9.00 |
0.04 |
1.00 |
NGOMOB 0
09/07/21 |
9.00 |
0.04 |
1.00 |
NGOMOB 0 10/19/21 |
9.00 |
0.05 |
1.00 |
NGOMOB 0
11/02/21 |
9.00 |
0.05 |
1.00 |
NGOMOB 0
12/07/21 |
9.00 |
0.05 |
1.00 |
Benchmark NTBills |
|||
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
NIGTB 0
01/14/21 |
9.00 |
0.03 |
1.00 |
NIGTB 0
02/11/21 |
9.00 |
0.03 |
1.00 |
NIGTB 0
03/11/21 |
9.00 |
0.03 |
1.00 |
NIGTB 0
04/29/21 |
9.00 |
0.04 |
1.00 |
NIGTB 0
05/13/21 |
9.00 |
0.04 |
1.00 |
NIGTB 0
06/10/21 |
9.00 |
0.04 |
1.00 |
NIGTB 0
07/01/21 |
9.00 |
0.04 |
1.00 |
NIGTB 0
08/26/21 |
9.00 |
0.04 |
1.00 |
NIGTB 0
09/09/21 |
9.00 |
0.05 |
1.00 |
NIGTB 0
10/14/21 |
9.00 |
0.05 |
1.00 |
NIGTB 0 11/11/21 |
9.00 |
0.05 |
1.00 |
NIGTB 0
01/14/21 |
9.00 |
0.03 |
1.00 |
NIGTB 0
02/11/21 |
9.00 |
0.03 |
1.00 |
Money Markets
Interest rates leaped into
double-digit figures today as expected, spiking by over 1000% to close at
10.00% and 10.50% for the OBB and OVN rates, respectively. System Liquidity is
estimated to close the week at c. N21.9Bn positive following Retail FX
intervention (c. N300Bn), FGN Bonds Auction funding (c. N233.27Bn), and
additional CRR (c.316.5Bn) debit by the Apex bank.
We expect interbank funding rates to
remain elevated opening next week. However, inflows from OMO maturities and
bond coupon payment should ease system liquidity later in the week.
Money Market Rates |
||
|
Current (%) |
Previous (%) |
Open Buy Back (OBB) |
10.00 |
1.00 |
Overnight (O/N) |
10.50 |
1.08 |
FX Market
The FX Market closed the week on a muted note, as traded volumes in the
I&E FX Window dropped by 42% D/D. Demand from foreign portfolio investors
persisted with little supply to match; consequently, the rate closed at
N394.17/$ (0.04% D/D depreciation).
The Naira lost ground at the parallel market against the greenback due to
no collection by the BDCs from the Apex Bank while demand remains persisted.
The cash rate closed at N475.50/$ (0.42% D/D depreciation), while the transfer
rate remained unchanged to close the week at N486.00/$.
FX Market |
||
Current (N/$) |
Previous (N/$) |
|
CBN Spot |
379.00 |
379.00 |
CBN SMIS |
380.69 |
380.69 |
I&E FX Window |
394.17 |
394.00 |
Cash Market |
475.50 |
473.50 |
Transfer Market |
486.00 |
486.00 |
Eurobonds
The rally in the NIGERIA Sovereign tickers fizzled
out closing the week, as we saw improved offers in the market matched with less
aggressive bids while some players looked to book profits from gains over the
past ten days. Consequently, yields expanded by an average of c.3bps across the
sovereign curve D/D. Other SSA papers (GHANAs, ANGOLAS, IVYCSTs) also traded
calmly, with yields closing flat D/D.
The NIGERIA Corps had a bullish session, with most
buyers seen across most tracked papers pushing yields further down D/D. The
ACCESS 2021s and SEPLLN 2022s were the day's biggest gainers, dipping by 19ps
and 66bps, respectively.
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