Secondary Market Bond Yields Drop Aggressively Following Auction Rate Cuts

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Friday, June 19, 2020 / 8:35 AM  / By Zedcrest Capital / Header Image Credit: Money Marketing


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FGN Bonds

As anticipated, market activity picked in the bond space today with yields nosediving across the curve taking a cue from PMA auction stop rates from yesterday. The 2050s paper remained the most active of the auction papers, opening trading at around 12.00% levels but by close of business had dropped 10bps to close at 11.90% on the offer. Eventually, we saw yields compress by an average of c.66bps across the benchmark bond curve.

In the last session for the week, we expect to see pockets of demand on most of the bond papers, especially on the auction maturities as investors cherry-pick on bonds at offered levels. 

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

5.65

4.74

(0.98)

 

16.39 27-Jan-22

6.01

4.56

(1.60)

 

12.75 27-Apr-23

8.04

7.23

(1.05)

 

14.20 14-Mar-24

8.03

7.61

(1.02)

 

13.53 23-Mar-25

8.11

7.44

(0.47)

 

12.50 22-Jan-26

9.23

8.60

(0.66)

 

16.29 17-Mar-27

10.04

9.61

(0.54)

 

13.98 23-Feb-28

9.91

9.40

(0.76)

 

14.55 26-Apr-29

10.45

9.32

(0.44)

 

12.15 18-Jul-34

10.99

10.75

(0.41)

 

12.40 18-Mar-36

11.10

10.79

(0.13)

 

16.2499 18-Apr-37

11.18

10.88

(0.21)

 

14.80 26-Apr-49

12.05

11.84

(0.30)

 

 

Treasury Bills

The treasury bills market was awfully quiet following the announcement of the much-expected OMO auction but remained largely offered from the mid- to the long-end of the curve. Few orders were filled as interest remained largely on the February and March bills offered slightly above its pairs. By the close of business, yields had expanded slightly by an average of c.3bps across the OMO curve.

At the OMO auction, the Apex bank sold a total of N70BN offered across three tenors. The demand remained healthy, with an average bid-to-cover ratio of 2.39X, allowing the Apex bank to maintain the stop rates across all three tenors.

NTB space saw a pickup in activity, with attention mostly focused on the newly issued 182days paper. We saw a few trades passed through that part of the curve closing the day around 2.00%.

Market activity is expected to slow down tomorrow as funding for FX Retail and Bond auctions squeeze on system liquidity.

 

OMO Auction  Results - 18 June 2020

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

Previous Rate (%)

Changes

82 days

4.950

10.00

20.04

10.00

4.9500

0.0000

159 days

7.790

10.00

24.00

10.00

7.7900

0.0000

341 days

8.990

60.00

123.54

60.00

8.9900

0.0000

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 7/2/2020

5.00

1.20

(0.50)

NGOMO 8/13/2020

5.00

1.20

(0.50)

NGOMO 9/3/2020

4.00

1.20

0.00

NGOMO 10/1/2020

5.00

1.20

0.00

NGOMO 11/03/2020

6.00

1.20

0.00

NGOMO 12/01/2020

6.00

1.20

0.00

NGOMO 01/05/2021

6.25

1.20

0.00

NGOMO 02/02/2021

6.25

1.20

0.65

NGOMO 03/02/21

6.25

1.20

0.65

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 2-Jul-20

4.00

0.10

0.50

NIGTB 1-Oct-20

5.00

0.10

1.00

NIGTB 12-Nov-20

4.50

0.10

0.50

NIGTB 14-Jan-21

5.00

0.10

0.00

NIGTB 11-Feb-21

5.00

0.10

0.00

 

Money Markets

Interbank rates slumped, as inflows from OMO maturities boosted system liquidity to open at c.N493.25bn positive. Rates dipped by a whooping c.570bps, with levels closing the day lower at 2.00% and 3.70% for OBB and OVN rates respectively. 
We expect an uptick in rates, probably into double-digit range due to the bi-weekly retail auction and bond auction funding due to hit the market tomorrow.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

2.00

8.17

Overnight (O/N)

3.70

8.92

 

FX Market

At the interbank, All the FX market indices were fairly stable except for the I&E window which appreciated slightly 0.99k although liquidity level remained low with most banks mostly bided at N383.00/$ and N387.00/$.


FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

361.00

361.00

CBN SMIS

380.69

380.69

I&E FX Window

385.70

386.69

Cash Market

451.00

451.00

Transfer Market

455.00

455.00

 

Eurobonds

The NGERIA Sovereign tickers traded on a weak note, despite some recovery in global oil prices. The market stayed largely offered across the sovereign curve, especially at the mid- to long-end (2027s and above), causing yields to expand at an average of c.12bps across the curve.

The NGERIA Corps tickers on the hand were slightly bullish given that most of the tracked papers were scarce. The ETINL 24s and ACCESS 21s were the market interest but had little supply to match.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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