Sell-off in the T-bills Market as Yields Continue to Retrace Across the OMO Curve

Wednesday, March 4, 2020 / 06:50 AM / By Zedcrest Capital / Header Image Credit: Business Trumpet

Below are highlights of trading activities in the fixed income and forex market on March 03, 2020

FGN Bonds

The Bond Market traded on a mixed note, with decent activity across the curve. The mid- to long-end saw the most traction, with local investors exhibiting a bullish demeanor, as the market continues to recover from last week's bearish view, buoyed by the news of the first case of the Coronavirus pandemic in Nigeria. Yields, however, expanded by an average of 3bps across the benchmark bond curve.

We expect to see some bullish activity at the long-end, as local corporates take advantage of its attractive yields.

Treasury Bills

The Treasury Bills market continued its bearish outlook, as we continue to see an uptick in yields across the OMO curve. The long-end had improved offers with January OMO bills gathering the most traction, with supply coming mostly from offshore investors, who continue to take advantage of the profitably spread between the primary OMO market and secondary market. Yields compressed by c.1bp across the benchmark OMO curve.

The NTB side traded on a somber note, as the unattractiveness of yields across the NTB curve caused local investors to sell-off, heralding interest in other Federal government-backed instruments e.g Promissory notes etc. Yields expanded by an average of c.24bps across the benchmark NTB curve.

We expect the bearish outlook to persist going into tomorrow's session, as banks sell-off, looking for short term fixes to aid funding cost, till respite comes via the OMO maturity window.

Money Market

Interbank rates remained in double-digit figures, despite system liquidity figures opening with c.N205.70bn, as banks are still feeling the effect of last week's CRR debit. OBB and OVN closed at 14.67% and 15.42% respectively.

We expect rates to remain unchanged, with no liquidity respite expected until Thursday (OMO maturities).

FX Market

At the Interbank, the Naira/USD spot rate and SMIS rate remained unchanged to close at N307.00/$ and N358.51/$. The Naira depreciated at the I&E FX window, gaining 55k to close at N366.01/$.

The parallel market, the cash and transfer rate remained unchanged at N358.30/$ and N367.00/$ respectively.

Eurobond

The NGERIA Sovereign tickers continued to rally across the sovereign yield curve, as investors continue to trade oil price sentiment, supported by a c.3.82% increment D/D in oil prices, despite the U.S Federal Reserve cutting rates by c.50bps, as it looks to combat the Coronavirus scourge. Yields dropped by an average of c.9bps across the sovereign yield curve.

The NGERIA Corps tickers traded on bullish sentiment, with yields on the SEPLLN 2023s still strengthening by c.4bps D/D. Also, yields on the ACCESS 2021s and FIDBAN 2022s dropped by c.1bps apiece.

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