Investors Look to Secondary Market to Fill Demand, Treasury Bills Close Week Bullish

Sunday, September 29, 2019 / 07:00AM / Zedcrest Capital / Header Image Credit: UBA

Below are highlights of trading activities in the fixed income and forex market on September 27, 2019

Bonds

The FGN bond market closed the week on a muted note, with little flows passed in the markets. We noted slightly improved offers across the short- to mid-tenured securities, as well as better buyers for some long-dated bonds notably the 2034s and 2049s. Yields consequently closed the week unchanged on the average across the benchmark Bond curve. 

As we approach a new month, we expect demand for duration to increase as investors plan reinvestment of Bond maturities of N233.90bn later in the month.

Source: Zedcrest Dealing Desk 

Treasury Bills

The Treasury bills market closed the week on a bullish note, as we saw demand for bills across the NTBills curve. The 1-year bill was the most actively traded maturity as clients covered for volumes lost at the previous day's auction and drove offered rates 38bps lower than the OMO stop rate. Yields closed the session 22bps lower on the average across the benchmark NTBills curve. 

We expect demand to persist once the market resumes trading next week supported by healthy system liquidity. However, the CBN may ramp up aggressive mop-up auctions to manage excess liquidity, increasing the chance for multiple OMO auctions per week.

Source: Zedcrest Dealing Desk

Money Market

Money market rates increased for a second consecutive session, ticking higher by about 2.00%, as the OBB and OVN closed the week at c.8.43% and c.9.29% respectively. System liquidity is estimated to close at c.N500bn positive, following debits of c.200bn for retail FX and Bond auctions.

We expect money market rates to oscillate in tandem with system liquidity levels in the coming week.

Source: FMDQ, Zedcrest

FX Market

At the interbank, the Naira/USD spot rate and SMIS rates remained stable to close the week at N306.95/$ and N358.13/$ respectively. At the I&E window, the closing rate for the Naira appreciated by 56k to close the week at N362.02/$.

The cash and transfer rates at the parallel markets saw no change, closing at N357.80/$ and N362.50/$ respectively.

Source: CBN, FMDQ, REXEL BDC

Eurobonds

The NGERIA Sovereigns continued its bullish run for the second consecutive session, as demand was sustained for the sovereign papers. We noted more volumes traded at the mid-end of the curve, with the 2032s (+6bps) and 2038s (+5bps) recording the highest demand. Yields closed lower by c.3bps on the average across all the papers on the sovereign curve.

The NGERIA Corps likewise saw some decent demand flows, as the ZENITH 2022s (+4bps) and ETINL 2024s (+3bps) regained some of the losses from the previous session.

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