New Week, Same Song: Bulls Continue The Stampede For Bonds

Tuesday, June 23, 2020 / 7:36 AM / By Zedcrest Capital / Header Image Credit: AARP

FGN Bonds

The bulls raced out the gates with demand seen across the benchmark bonds in the first trading session of the week, as investors continue to cover up for bids lost at the primary market auctions (FGN Bond and Sukuk). Bonds within the 20- to 30-year bracket were the most traded papers in the fixed income market as investors scrambled for offers on the most attractive yields on the curve. The auction papers; 2035s and 2050s printed most of the market trades, starting the day offered at 10.60% and 11.65% respectively but lost approximately 10bps and 15bps by the close of business. Consequently, yields compressed by an average of c.17bps across the benchmark bond curve to continue the trend from last week.

We expect the demand for bonds to persist as local investors continue to scramble for bonds to invest their idle cash.

Treasury Bills

It was a very sluggish trading session in the treasury bills space opening the week, with a few trades passed across the market. The market continued to show some love for the latest OMO issue (25May2021 paper) which traded around higher 5% levels at the early hours of the session. We also saw few interests in Jan2021 papers, albeit no trades as the bid/offer spread stood wide apart at 5.80/40%.

The NTB space was awfully quiet with few retail axes for April papers offered at 2.50%.

We expect the markets to sail slowly, as system liquidity is expected to remain tight and discourage position taking in bills.

Money Markets

Interbank rates remained relatively high, at double-digit levels, but dropped slightly compared to Friday’s close even though market liquidity opened the week lower. This may be attributed to the low funding pressure since there were no major outflows in the market today. Rates decreased by an average of c.80bps on both OBB and OVN rates, closing at 14.50% and 15.75% respectively while system liquidity is estimated to close the day at c.N70BN.

We expect rates to coast around this double-digit level tomorrow, provided that CBN does not credit CRR refund to boost market liquidity.

FX Market

The drought of dollar liquidity persisted in the interbank I&E market today, with scanty volumes passed through with market players bidding between N385.00 and N389.00 to the US Dollar. The CBN rates remained unchanged again for another consecutive session while the Naira weakened at the parallel market, losing an average of 0.65% of its value on both the cash and transfer rates.

Eurobonds

The NGERIA Sovereign tickers traded on a weaker note with more aggressive offers shown across the curve compared to last week closing, with the 2047s and 2049s papers the greatest losers across the sovereign curve. Locals showed no interest in papers offered better, compared to the market, at the belly and the tail of the curve. Consequently, we saw yields expand on an average of c.11bps across the curve.

The NGERIA Corps tickers also had a quiet session, while the only movement seen amongst the tracked papers was on UBA 2022s and SEPPLN 2022s which weakened by c.28bps and c.10bps respectively.

Related News

1.        Anchoria Fixed Income Monitor: An Activities Filled Week With T-Bills, OMO and Bond Auction

2.       The Bulls Re-emerge as Average Yield Dips 1.2% WoW

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

4.       Some Room for Manoeuvre for the DMO

5.       Secondary Market Bond Yields Drop Aggressively Following Auction Rate Cuts

6.       Summary of FGN Bond Auction Results For June 2020

7.       Double Whammy At the Primaries as The DMO Drops Rates At Both NTB and Bond Auctions

8.      Yield Dropped Opening The Week As Unmet Sukuk Demand Chased Benchmark Bonds

9.       Guinness Nigeria Plc Series 1 and 2 Commercial Paper Is Coming soon