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Secondary Market Volumes Increase As Investors Scurry To Reinvest

Bonds & Fixed Income	582 VIEWS
Bonds & Fixed Income
582 VIEWS

Saturday, October 5, 2019 / 05.00PM / by Zedcrest Capital /Header Image Credit: Interest.co.nz

Below were highlights of trading activities in the fixed income and forex market today

Bonds

Activity in the Bond market picked up in today's trading session, demand improved at the mid-end of the bond curve. We noticed a preference for yields, as investors dumped the 2028s in favour of the higher-yielding 2029s. Yields consequently compressed by c.1bp on the average across the benchmark yield curve.

We expect a slight increase in demand for bonds, as investors weigh reinvestment options for bond maturities of c.N234bn expected later in the month.

Proshare Nigeria Pvt. Ltd.

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market opened on a bullish trend, most especially at the long-end of the NTB curve, as investor demand flowed into the secondary market in the absence of an OMO auction. We noted large trading activity on the 28-sept-20 and 1-oct-20 maturities in particular, which saw c.25bps downward movement in yields. Yields consequently closed the week lower by c.6bps on the average across the benchmark NTB curve.

We expect the current bullish trend to be sustained opening the week, supported by buoyant system liquidity.

Benchmark Treasury Bills
Description	Bid (%)	Offer (%)	Day Change (%)
14-Nov-19	12.60	11.70	0.10
5-Dec-19	12.80	12.40	0.10
2-Jan-20	12.10	11.60	(0.40)
6-Feb-20	12.80	12.00	(0.20)
19-Mar-20	12.80	11.60	(0.10)
2-Apr-20	12.80	11.80	0.00
14-May-20	13.10	12.60	0.20
04-Jun-20	13.00	12.20	0.00
02-Jul-20	12.95	12.75	(0.30)
13-Aug-20	13.10	12.85	(0.05)
3-Sep-20	13.20	12.75	(0.05)

Source: Zedcrest Dealing Desk

Money Market

Money market rates dropped by an average of c.500bps from yesterday as expected with the excess liquidity in the market. OBB and OVN rates closed the week at 2.71% and 3.43% respectively.

We expect money market rates to remain low barring any aggressive mop-up by the CBN.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	2.71	8.05
Overnight (O/N)	3.43	9.50

Source: FMDQ, Zedcrest

FX Market

At the interbank, the Naira/USD spot rate remained stable at N307.00/$ while the SMIS rates remained stable at N358.13/$. At the I&E window, the closing rate for the Naira was depreciated by 22k to close the week at N362.77/$.

The cash and transfer rates at the parallel markets also saw no change, closing at N357.80/$ and N362.50/$ respectively.

FX Market
	Current (N/$)	Previous ( N/$)
CBN Spot	307.00	307.00
CBN SMIS	358.13	358.13
I&E FX Window	362.77	362.55
Cash Market	357.80	357.80
Transfer Market	362.50	362.50

Source: CBN, FMDQ, REXEL BDC

Eurobonds

Trading activity in the NGERIA Sovereigns and Corps papers closed the week on a muted note. Nigerian financial bank papers remained pressured in the aftermath of debits worth $1.4 billion in penalties over failure to meet the set loan to deposit ratios by the Central Bank of Nigeria as it tries to spur growth in the economy.