NTB Auction: DMO Raises 1-Year Rate by 100bps, Its Seventh Consecutive Increase

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Thursday, March 11, 2021 / 09:18AM / by Zedcrest Capital / Header Image Credit: iStock


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FGN Bonds

The Bond Market had a relatively quiet session, with some slight demand at short to- mid-end of the curve, with little volumes passed. Most of the day's interests were seen on off-the-run bonds like the FGN Sukuk 2024s. At the long-end of the curve, trading slowed down as offers dropped below 11%, well below client bids. The 2050s changed hands comfortably at 11.05% for most of the session. Consequently, yields expanded the benchmark bond curve, rising by 3bps on the average.

 

We expect demand in the market to pause in the interim, with the DMO confirming the weak financial position of the FG via higher stop rates at its recent auctions (Bonds/NTbills), and the CBN also expected to sustain higher rates in the OMO market, in a bid to checkmate pressures from FPI outflows.

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

7.00

6.25

(0.30)

14.20 14-Mar-24

8.10

6.30

0.00

13.53 23-Mar-25

8.30

6.35

0.00

12.50 22-Jan-26

9.85

9.50

0.00

16.29 17-Mar-27

10.00

9.70

0.05

13.98 23-Feb-28

10.05

9.80

0.00

14.55 26-Apr-29

10.08

9.90

0.00

12.15 18-Jul-34

11.10

10.85

0.00

12.50 27-Mar-35

11.10

10.90

(0.05)

12.40 18-Mar-36

11.15

10.90

0.00

16.2499 18-Apr-37

11.18

10.95

0.00

9.80 24-Jul-45

11.20

11.00

0.00

14.80 26-Apr-49

11.20

11.00

(0.02)

12.98 27-Mar-50

11.20

11.02

(0.05)

 

Treasury Bills

Yields inched slightly higher by c.6bps in today's session, as expectations for a weak NTB auction result remained high, which prompted a slight selloff on some mid- and long-tenured maturities. Despite the boost in system liquidity from OMO maturities of N50.00Bn in the previous session, trading activities remained very low as market players anticipated supply at the primary auction.

 

In line with our expectations, the NTB auction by the CBN was significantly oversubscribed by c.325%, with the most demand on the 364-day which a bid value of N125Bn. Stop rates for the 91- and 182-day tenors remained stable, while the 364-day rate was increased by 100bps to clear at 6.50% (the highest level seen since February 2020. The DMO sold a total of N108.76Bn in maturing treasury bills across the three maturities on offer, c.N19.86Bn more than on offer as it continued to recover the repayments done at earlier auctions this year.

 

We expect the market to tilt slightly bearish tomorrow, with the lift in the PMA 364-day bills (+100bps) rate fuelling speculations for a further hike in OMO rates by the CBN.

 

Primary Market Auction Result

NTB - March 10, 2021

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

Previous Rate (%)

Changes

91 days

2.0000

4.41

18.39

4.74

2.0000

0.0000

182 days

3.5000

14.00

53.03

23.45

3.5000

0.0000

364 days

6.5000

70.50

125.44

80.57

5.5000

1.0000

 

 

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

 


Proshare Nigeria Pvt. Ltd.


Money Markets

Rates in the interbank money markets ticked higher, despite improved system liquidity. The overnight (O/N) and Open Buy-Back (OBB) rates closed at 11.67% and 12.50%, in line with the theme of the week.

 

The CBN is expected to float an OMO auction tomorrow to meet up the unmet primary market demand, which is expected to negatively impact money market rates at the tail-end of the week.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

11.67

10.25

Overnight (O/N)

12.50

11.50

 


FX Market

At the I&E FX window, the closing rate for the Naira appreciated by 83k (0.21% D/D) to close at N411.13/$ despite a 66% D/D drop in traded volumes.

 

The Naira had a mixed trading session today which saw the cash rate deprecate by N1.00 to close at N481.00/$ while the transfer rate appreciated by N0.50 to close at N492.50/$ to end the session.


FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

411.13

412.00

Cash Market

481.00

480.00

Transfer Market

492.50

493.00

 


Eurobonds

The NIGERIA Sovereign tickers continued the bullish run during today's trading session, with demand seen across the curve amidst still positive sentiments in global oil prices (despite the pullback from its Friday high of $70/bl. Yields dropped further by an average of 6bps across the sovereign yield curve.

 

The NIGERIA Corps tickers continued to enjoy investor interests, as yields compressed across most of the tracked papers. The short-dated papers led the pack, as the ACCESS 2021s, Zenith 2022s, and UBANL 2022s all saw 79bps, 68bps, and 54bps drops in their yields respectively.


Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.



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