Fixed Income Markets Close The Week Strong As Bulls Continue to Swipe Up Available Bonds

Proshare

Saturday, June 20, 2020 / 2:56 PM  / By Zedcrest Capital / Header Image Credit: BMO Global


Proshare Nigeria Pvt. Ltd.


FGN Bonds

It was a lively session to close out the week, as local bond bulls continued to dominate the market. Demand was evident across the benchmark bond curve, most notably at the long-end as the 30-year bonds broke the 12.00% resistance barrier. The 2049s and 2050s traded sub-11% today, as local investors continued to hunt for the most attractive yields across the bond curve. Consequently, yields compressed by an average of c.21bps across the benchmark bond curve to consolidate the gains witnessed most of the week.

We expect the demand for bonds to persist going into the coming week, but offers should be in good supply as dwindling system liquidity pressures local banks to offload some positions.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

5.40

4.71

(0.25)

 

16.39 27-Jan-22

5.73

4.54

(0.28)

 

12.75 27-Apr-23

7.81

7.03

(0.23)

 

14.20 14-Mar-24

8.03

7.61

0.00

 

13.53 23-Mar-25

7.99

7.43

(0.12)

 

12.50 22-Jan-26

9.22

8.70

(0.01)

 

16.29 17-Mar-27

9.99

9.70

(0.05)

 

13.98 23-Feb-28

9.89

7.82

(0.02)

 

14.55 26-Apr-29

10.19

9.04

(0.26)

 

12.15 18-Jul-34

10.98

10.50

(0.02)

 

12.40 18-Mar-36

11.00

10.55

(0.10)

 

16.2499 18-Apr-37

11.07

10.59

(0.11)

 

14.80 26-Apr-49

11.95

11.65

(0.10)

 

 

Treasury Bills

Activity picked up in the treasury bills market as a lot of maturities were offered as local banks scrambled for liquidity to fund the CRR debit that hit today. The few bids we noted were firmly stuck on the Dec. and Jan. maturities for most of the session, while demand for some May papers came in close to end of the trading session. Yields compressed by an average of c.3bps across the benchmark OMO curve.

We also saw improved offers of NTBs, especially on the long-dated papers, pressured by tighter system liquidity. However, we noted some client interests were skewed towards the short-dated Promissory Note papers which are better offered.

We expect the market to trade in tandem with system liquidity levels opening the week, with some more funding pressures expected to put more pressure on the positive carry on T-bills positions.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 7/2/2020

5.00

1.00

0.00

NGOMO 8/13/2020

5.00

1.00

0.00

NGOMO 9/3/2020

5.00

1.00

1.00

NGOMO 10/1/2020

5.00

1.00

0.00

NGOMO 11/03/2020

5.60

1.00

(0.40)

NGOMO 12/01/2020

5.60

1.00

(0.40)

NGOMO 01/05/2021

6.00

1.00

(0.25)

NGOMO 02/02/2021

6.00

1.00

(0.25)

NGOMO 03/02/21

5.60

1.00

0.00

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 2-Jul-20

3.00

0.10

(1.00)

NIGTB 1-Oct-20

4.00

0.10

(1.00)

NIGTB 12-Nov-20

4.00

0.10

(0.50)

NIGTB 14-Jan-21

5.00

0.10

0.00

NIGTB 11-Feb-21

5.00

0.10

0.00

 

Money Markets

Interbank rates jumped into double-digits today as funding pressures from bi-weekly retail auction and bond auction as well as CRR debits clamped down on bank's liquidity positions. Rates increase by an average of c.1300bps, as OBB and OVN rates closed at 15.17% and 16.67% respectively with system liquidity estimated to close at c.N150BN to close the week.

We expect rates to remain elevated opening next week, as the weekly Wholesale FX auction funding is expected to further squeeze system liquidity.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

15.17

2.00

Overnight (O/N)

16.67

3.70

 

FX Market

At the interbank, closing rates at all the FX market segments were fairly stable except for the I&E window which coughed up some of the previous session's gains and depreciated by 0.80k. Traded volumes dropped by 43%, with only c.$38million traded signalling the continued low liquidity in the market.

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

361.00

361.00

CBN SMIS

380.69

380.69

I&E FX Window

386.50

385.70

Cash Market

451.00

451.00

Transfer Market

455.00

455.00

 

Eurobonds

The NGERIA Sovereign tickers bounced from the recent weak sessions to post a strong close to the week. Demand trickled back from mostly offshore investors for the sovereign papers off the back of some recovery in global oil prices. Consequently, yields compressed by an average of c.12bps across the curve.

The NGERIA Corps tickers also got some love, from both local and offshore market players. The biggest gainer on the day was the SEPPLN 23s whose yields compressed by c.257bps as the market reacted positively to the company's restructuring of its assets from the parent company to its subsidiary.

 

Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.



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