Relentless Bears Continue to Tighten the Grip on the FGN Bond Market

Proshare

Thursday, January 28, 2021 / 8:27AM / by Zedcrest Capital / Header Image Credit: iStock


Proshare Nigeria Pvt. Ltd.

 

FGN Bonds 

The FGN bond market continued on a bearish run, with the 2034s- 2050s bond maturities trading firmly above the 10.00% mark as sellers continue to outdo themselves amidst a weak appetite for bonds. We saw a few buyers of short-dated bonds (2023s-2026s papers), albeit few trades were executed as the bid/offer spread remained wide. We also saw some actions at the curve's belly and tail (2034s, 2037s, and 2049s papers), which settled within the range 10.10% - 10.50% for the 2034s-2037s bonds and 10.15%-10.55% for the 2049s. Overall, yields trended up across the benchmark curve, closing the day +c.38bps.

 

We think yields at the long end of the bond curve is becoming attractive, especially for duration buyers who seek a double-digit return on their portfolio in the light of the ultra-low yields on short-duration alternatives (Treasury Bills and CPs). Consequently, we expect some demand to trickle in at these new levels.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

 16.39 27-Jan-22

4.98

0.99

0.00

 

12.75 27-Apr-23

6.43

4.67

0.00

 

14.20 14-Mar-24

6.96

5.69

0.00

 

13.53 23-Mar-25

7.04

5.50

0.00

 

12.50 22-Jan-26

8.04

6.54

0.43

 

16.29 17-Mar-27

8.61

7.92

0.00

 

13.98 23-Feb-28

9.10

7.81

0.32

 

14.55 26-Apr-29

9.56

8.00

0.59

 

12.15 18-Jul-34

10.73

9.96

0.52

 

12.50 27-Mar-35

11.08

9.90

0.82

 

12.40 18-Mar-36

11.02

9.83

0.73

 

16.2499 18-Apr-37

10.93

9.87

0.59

 

9.80 24-Jul-45

10.98

9.70

0.67

 

14.80 26-Apr-49

11.07

10.15

0.60

 

12.98 27-Mar-50

11.01

10.00

0.47

 

 


Treasury Bills

Today, the Treasury Bills market traded on a very hush note, staying firmly offered across all tenors as the NTB PMA took place. The long-end of the OMO bills curve weakened significantly as traders inched up their offer in other to attract demand. The 18th January 2021 OMO bill leaped to a 4.00% offer during the trading session; however, this was not enough to draw any demand as market participants look to fill their order at the expected OMO bills auction tomorrow.

 

At the Primary Market Auction (PMA), the DMO rolled over a total of c. N181.98bn, approximately 97% of the amount offered with allotment redistributed across the three tenors. The DMO once again repaid about 2% of the amount offered on the 1yr paper as they continue to resist the urge to issue bills at high levels. Stop rates closed higher by an average of c.28bps across the three tenors compared to the last stop rates, with an average bid-to-cover ratio of 1.59X, albeit the 1year paper garnered most of the market bids.

 

We expect to see demand for NT-bills during tomorrow's session, driven by market participants looking to fill their lost bids from today's auction. 


Proshare Nigeria Pvt. Ltd. 

 

Primary Market Auction Result

NTB - 27 Jan 2021

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

Previous Rate (%)

Changes

91 days

0.5500

7.50

20.18

11.39

0.5000

0.0500

182 days

1.3000

54.59

55.98

47.48

1.0000

0.3000

364 days

2.0000

125.20

213.45

123.11

1.5000

0.5000

 

 

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 02/02/21

9.00

0.03

0.00

NGOMOB 0 03/02/21

9.00

0.03

0.00

NGOMOB 0 05/11/21

9.00

0.04

0.00

NGOMOB 0 06/08/21

9.00

0.04

0.00

NGOMOB 0 08/10/21

9.00

0.04

0.00

NGOMOB 0 09/07/21

9.00

0.04

0.00

NGOMOB 0 10/19/21

9.00

0.05

0.00

NGOMOB 0 11/02/21

9.00

0.05

0.00

NGOMOB 0 12/07/21

9.00

0.05

0.00

 


Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 01/14/21

9.00

0.03

0.00

NIGTB 0 02/11/21

9.00

0.03

0.00

NIGTB 0 03/11/21

9.00

0.03

0.00

NIGTB 0 04/29/21

9.00

0.04

0.00

NIGTB 0 05/13/21

9.00

0.04

0.00

NIGTB 0 06/10/21

9.00

0.04

0.00

NIGTB 0 07/01/21

9.00

0.04

0.00

NIGTB 0 08/26/21

9.00

0.04

0.00

NIGTB 0 09/09/21

9.00

0.05

0.00

NIGTB 0 10/14/21

9.00

0.05

0.00

NIGTB  0 11/11/21

9.00

0.05

0.00

NIGTB 0 01/14/21

9.00

0.03

0.00

NIGTB 0 02/11/21

9.00

0.03

0.00

 


Money Markets

System liquidity remained very buoyant, closing the day at c. N365.48Bn positive with no significant local banks' funding activities. Consequently, OBB and Overnight rates remained stable at 5.00% levels throughout the trading session.

 

We expect rates to trend northwards tomorrow as the CBN should float an OMO auction to curb excess system liquidity.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

5.00

4.50

Overnight (O/N)

5.50

5.25

 

 

FX Market

Trading activity in the I&E FX market slowed down today, with traded volumes down by 52% ($51.50mio traded) D/D. The bid range widened by N5.00k compared to yesterday, with rates ranging within a high of N396/$1 and a low of N385/$1.  The closing rate also depreciated by an additional N0.25k to close at N394.25/$1.

 

The Naira also depreciated at the parallel market by N2.50K triggered by an acute FX supply shortage and increased market activities.


FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

394.25

394.00

Cash Market

476.50

476.00

Transfer Market

489.00

487.00

 

 

Eurobonds 

The NIGERIA Sovereigns resumed its bearishness for a second consecutive session as profit-takers' actions remain the driver for the day. We saw less aggressive bids across the sovereign curve, with the largest movements seen on the mid and long-dated bonds causing yields to expand by an average of c.5bps D/D. At the SSA space, the IVYCSTs bond weakened the most amidst its pairs shedding additional c.8bps for a third consecutive session.

 

Although we saw slight demand, the NIGERIA Corps was quiet, albeit with large yield movement, caused by the scarcity of some of these tracked papers. The FIDBAN 22s and ACCESS 21s saw the largest market movement closing the day -c,27bps, and -c.34bps D/D.


Proshare Nigeria Pvt. Ltd.




Proshare Nigeria Pvt. Ltd.



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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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