Local Demand at The OMO Auction Improves Amidst Buoyant Liquidity, CBN Maintains Rates

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Friday, February 19, 2021 / 8:03AM / By Zedcrest Capital / Header Image Credit: Getty Images


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FGN Bonds

The Bond Market opened on a negative note, an expected reaction from the previous day's Bond auction results. Yields weakened across the benchmark bond curve by c.80bps on the average, with wide spreads quoted in the first two hours of trading. As spreads improved later in the day, we started seeing bonds at the belly of the curve (2028s and 2029s) change hands around 11.00% levels while the 2045s traded at 11.65% at the tail-end.

 

As the upward direction of yields becomes clearer, we expect investors to stay largely risk-off on bonds in general with some cherry-picking expected as yields cross historical support levels (11.50%, 12.00% etc.).

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

8.99

7.00

1.19

14.20 14-Mar-24

9.50

7.66

0.80

13.53 23-Mar-25

10.01

7.98

0.91

12.50 22-Jan-26

10.50

10.00

0.30

16.29 17-Mar-27

11.25

10.15

0.65

13.98 23-Feb-28

11.25

10.58

0.55

14.55 26-Apr-29

11.25

10.80

0.55

12.15 18-Jul-34

11.70

11.30

0.60

12.50 27-Mar-35

11.75

11.00

0.65

12.40 18-Mar-36

11.75

11.00

0.70

16.2499 18-Apr-37

11.75

11.00

0.70

9.80 24-Jul-45

12.50

11.58

1.35

14.80 26-Apr-49

12.50

11.82

1.15

12.98 27-Mar-50

12.50

11.76

1.10

 

Treasury Bills

The secondary market of Treasury Bills took a backseat in today's trading session, as all eyes remained fixed at the OMO auction floated by the CBN. Offers flooded the streets, with no interest from local banks as interbank system liquidity remained tight. The long-dated (February 2022) papers remained offered well above 9.00% with no takers seen amidst some concerns that the CBN may increase stop rates at the auction.

 

At the OMO auction, the Apex bank maintained the stop rates across the three tenors on offer, as bid amounts from local banks increased as the appetite for double-digit rates improved the bid-to-offer ratio to an average of 2.60X. The stop rates for the 89-, 180- and 362-day tenors closed at 7.00%, 8.50% and 10.10% respectively, as the Apex bank comfortably issued a total of N180bn across the three tenors.

 

We expect a volatile trading session tomorrow, with bids expected to open close to the OMO stop rates with local bank demand hampered by an expected system liquidity squeeze due to auction debits.


OMO AUCTION RESULT - February 18, 2020

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

Previous Rate (%)

Changes

89 days

7.0000

20.00

52.68

20.00

7.0000

0.0000

180 days

8.5000

20.00

54.40

20.00

8.5000

0.0000

362 days

10.1000

140.00

350.73

140.00

10.1000

0.0000

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 03/02/21

11.00

0.03

0.00

NGOMOB 0 05/11/21

11.00

0.03

0.00

NGOMOB 0 06/08/21

11.00

0.03

0.00

NGOMOB 0 08/10/21

12.00

0.05

0.00

NGOMOB 0 09/07/21

12.00

0.05

0.00

NGOMOB 0 10/19/21

12.00

0.07

0.00

NGOMOB 0 11/02/21

12.00

0.07

0.00

NGOMOB 0 12/07/21

13.50

0.07

0.00

NGOMOB 0 01/13//22

12.00

0.07

0.00

 

Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 03/11/21

11.00

0.03

0.00

NIGTB 0 04/29/21

11.00

0.03

0.00

NIGTB 0 05/13/21

11.00

0.03

0.00

NIGTB 0 06/10/21

11.00

0.03

0.00

NIGTB 0 07/01/21

12.00

0.05

0.00

NIGTB 0 08/26/21

12.00

0.05

0.00

NIGTB 0 09/09/21

11.00

0.05

0.00

NIGTB 0 10/14/21

12.00

0.07

0.00

NIGTB  0 11/11/21

12.00

0.07

0.00

NIGTB  0 01/11/22

13.50

0.07

0.00

 


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Money Markets

The interbank system liquidity dipped by c.1.39% opening Thursday (c.N582.82bn positive) ahead of the OMO auction floated by the CBN. With expected OMO sales of c.N180bn face value, the market went even tighter during the day, causing interbank rates to close higher at 3.50% and 3.83%  for Open Buy Back (OBB) and Overnight (O/N) rates respectively.

 

We expect rates to close the week higher interbank system liquidity is expected to take a hit from auction provisioning (FGN Bond and FX Retail auctions) as well as possible CRR debits by the CBN.  


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

3.50

2.00

Overnight (O/N)

3.83

2.25

 


FX Market

The I&E FX window closed the trading session on a positive note as volumes traded ($62.69mio) increased significantly by 54% D/D while most banks remained firmly bided between N390.00/$ and N423.15/$, with the closing rate closed stronger at N407.80/$.

 

At the parallel market, the cash market closed 0.32% higher than yesterday, with the Naira depreciating by N1.50K due to shortage of FX supply with no sale to BDCs by the CBN today. The transfer segment remained unchanged, closing the day at N490.00/$.


FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

407.80

410.00

Cash Market

476.00

474.50

Transfer Market

490.00

490.00

 


 

Eurobonds

Trading activities in the NIGERIA Sovereigns space picked up on a positive note, as the markets took advantage of depressed prices after two consecutive weak trading says. The bulk of the action was seen at the curve's head, especially the 2022s and 2023s, as yields compressed by an average of c.6bps across the sovereign curve. Sovereign papers in the SSA space also traded on a positive note, with most of the action on the Kenya 2024s paper following the news of the government's plan to take advantage of lower yields to refinance the $2bn Eurobond by the end of June.

 

The ECOTRA 2026s paper was the most active of the NIGERIA Corps tickers, as quoted spreads tightened to 25c reflecting the bonds continued liquidity. Yields weakened across all other tracked papers, ass investors looked to cycle out of corporate papers holdings.


Proshare Nigeria Pvt. Ltd. 



Proshare Nigeria Pvt. Ltd.



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