Fixed Income Markets Again Shrug Off Rising Inflation Ahead Of Monthly FGN Bond Auction

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Tuesday, August 18, 2020 / 8:15 AM / By Zedcrest Capital / Header Image Credit: Investment News


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FGN Bonds

It was a quiet start for FGN Bonds opening the week, as market participants remained focused on the monthly Bond auction scheduled for mid-week. Tight system liquidity pressured yields at the short-end of the curve, as offers improved for the 2023s paper most notably. Spreads compressed across most of the benchmark securities, most notably at the mid-end of the curve, bringing yields down by c.29bps on the average at the close of the session.

We expect little market activity in tomorrow's session, as market participants look to the DMO to dictate the direction of yields at the primary auction later in the week.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

16.39 27-Jan-22

6.06

2.81

0.15

 

12.75 27-Apr-23

6.00

4.73

(0.38)

 

14.20 14-Mar-24

6.05

4.41

0.05

 

13.53 23-Mar-25

6.18

4.52

(0.00)

 

12.50 22-Jan-26

6.89

6.13

(0.10)

 

16.29 17-Mar-27

7.96

7.34

(0.97)

 

13.98 23-Feb-28

8.04

7.24

(1.08)

 

14.55 26-Apr-29

8.45

8.18

(1.11)

 

12.15 18-Jul-34

9.76

9.30

(0.05)

 

12.40 18-Mar-36

10.08

9.32

0.05

 

16.2499 18-Apr-37

10.20

9.32

0.05

 

14.80 26-Apr-49

10.04

9.85

(0.04)

 

 

Treasury Bills

Tight system liquidity continued to put pressure on yields in today's session as appetite for OMO bills dwindled for short-to mid-tenured securities. The long-dated papers remained well bid around 4.00% levels, showing market participants expectations for this liquidity squeeze to be short-lived. Yields expanded by 69bps on the average across the benchmark OMO curve.

We expect the market activities to pick in tomorrow's trading session, as OMO maturities are expected to ease the selling pressures on yields as system liquidity improves.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 9/3/2020

5.00

0.01

0.50

NGOMO 10/1/2020

5.00

0.01

0.50

NGOMO 11/03/2020

5.00

0.01

0.00

NGOMO 12/01/2020

5.00

0.01

0.00

NGOMO 02/02/2021

7.00

0.01

1.50

NGOMOB 0 03/02/21

7.00

0.01

1.00

NGOMOB 0 05/11/21

7.00

0.01

1.00

 

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 10/1/2020

5.00

0.01

2.50

NIGTB 11/12/2020

5.00

0.01

2.00

NIGTB 01/14/2021

5.00

0.01

2.00

NIGTB 02/11/2021

5.00

0.01

1.50

NIGTB 04/29/2021

5.00

0.01

1.50

NIGTB 05/13/21

5.00

0.01

1.00

NIGTB 06/10/21

5.00

0.01

1.00

 

Money Markets

OBB and OVN rates dropped by c.175% on the average compared to yesterday's close, providing little respite to funding positions for local banks. Market liquidity remained tight, opening at c.N88BN positive.

We expect system liquidity to ease up tomorrow as OMO maturities of c.N49bn are credited. Money market rates should, therefore, crash tomorrow, likely below 10.00% levels.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

16.40

17.60

Overnight (O/N)

17.50

19.80

 

FX Market

The FX space remained poorly supplied across all market segments. The IEFX window continued to trade leanly as trade volumes remained depressed while most market participants stayed bided at N380.00/$ and N386.00/$, causing the closing rate to appreciate slightly by 0.22k D/D.

The Naira weakened further at the parallel market by N1.50k on the average, despite news of the CBN's commitment to supply FX to BDCs once international flights resume.

 

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

381.00

381.00

CBN SMIS

380.69

380.69

I&E FX Window

385.78

386.00

Cash Market

475.00

473.00

Transfer Market

476.00

475.00

 

Eurobonds

The bull run of the NIGERIA Sovereigns Eurobond curve slowed down in the opening session of the week, as demand for the oil-related papers dwindled despite improved oil prices. We noted wider spreads on quotes for most of the session, but with little trading activity. Overall, yields expanded by an average of c.3bps across the sovereign curve.

The NIGERIA Corporates had a quiet session today although the market continues to show demand interest for the FIDBAN 2022s and ETINL 24s papers.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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