Yields Continue to Rally in the Bonds Market as February Inflation Rate Rises to 12.20%

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Wednesday, March 18, 2020 / 07:05 PM / By Zedcrest Capital / Header Image Credit: BusinessDay


Below are highlights of trading activities in the fixed income and forex market on March 17, 2020


FGN Bonds


The Bonds Market continued its bullish trend, as yields continue to rally across the bond curve. The mid (2027s) to long-end (2049s) continued to have the most buy-interest, as market players reinvested bond coupon payments of c.N140bn. Yields dropped by c.11bps across the benchmark bond curve.


The Nigerian Bureau of Statistics released Inflation Figures for February 2020, with inflation rate standing at 12.20%, a 0.07% rise from January 2020. Food inflation, which continues to be the main driver of the hike, rose to 14.90%, a 0.05% rise from the preceding month (14.85%), while core inflation rose to 9.43% from 9.35% recorded in January 2020.


We expect to see improved bids in tomorrow's session, as more tranches of bond coupon payment reinforces investors' buy-interest in bond maturities.


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

8.37

6.74

(0.32)

 

16.39 27-Jan-22

10.31

8.10

(3.53)

 

12.75 27-Apr-23

10.80

10.06

0.00

 

14.20 14-Mar-24

12.57

10.21

(1.63)

 

13.53 23-Mar-25

12.70

11.19

(1.40)

 

12.50 22-Jan-26

13.24

12.49

(1.05)

 

16.29 17-Mar-27

13.49

12.56

(0.57)

 

13.98 23-Feb-28

12.95

12.52

(1.20)

 

12.15 18-Jul-34

13.76

12.54

(0.74)

 

12.40 18-Mar-36

13.08

12.45

(0.93)

 

16.2499 18-Apr-37

12.85

12.40

(1.16)

 

14.80 26-Apr-49

12.88

12.06

(1.13)

 

 


Treasury Bills

The Treasury Bills Market continued its bullish trend in today's market, as bids slightly improved on OMO maturities across the curve. Demand was largely skewed to the mid-end of the OMO curve (Sep/Oct), as market players' reinvested OMO maturities of c.N300bn at tenor to maturities they were most comfortable at. Yields dipped by an average of c.3bps across the benchmark OMO curve.  


Similarly, The NTB side continued its bullish run, as local investors locked-in excess funds at the long-end of the NTB curve. Yields compressed by an average of c.18bps across the benchmark NTB curve.


We expect to see sustained buy-interest on mid-tenured OMO bills in tomorrow's session, as investors look to lock-in excess funds via OMO maturities coming in on Thursday. We also anticipate the NTB side to be quiet, as local players look to the outcome of the T-bills PMA scheduled tomorrow.


NTB  - 18 Mar 2020

 

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

2.00

2.00-2.50

2.49

182 days

8.39

3.20-3.80

3.78

364 days

37.18

5.00-6.00

5.30

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 2-Apr-20

18.00

13.00

0.00

NGOMO 14-May-20

18.00

13.00

0.00

NGOMO 4-Jun-20

18.00

13.00

0.00

NGOMO 2-Jul-20

18.00

13.00

0.00

NGOMO 13-Aug-20

18.00

13.00

0.00

NGOMO 3-Sep-20

18.00

13.00

0.00

NGOMO 1-Oct-20

17.60

13.00

(0.40)

NGOMO 3-Nov-20

18.00

13.00

0.00

NGOMO 1-Dec-20

18.00

13.00

0.00

NGOMO 5-Jan-21

18.00

15.50

0.05

NGOMO 02-Feb-21

18.00

13.00

0.05

 


Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 2-Apr-20

2.70

1.00

0.00

NIGTB 2-Jul-20

3.60

1.00

0.00

NIGTB 1-Oct-20

5.00

2.00

0.00

NIGTB 12-Nov-20

5.25

2.00

(0.25)

NIGTB 14-Jan-21

5.70

2.00

(0.30)

NIGTB 11-Feb-21

6.00

2.50

(0.50)

                                                                         


Money Market


System Liquidity opened with c.N266.11bn positive, as more tranches of the bond coupon payment flowed into the system. OBB and OVN rates closed lower at 11.71% and 12.64% respectively, as rates dropped by c.600bps D/D.


We expect rates to dip slightly in tomorrow's session, as another tranche of bond coupons further bolsters system liquidity.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

11.71

17.40

Overnight (O/N)

12.64

18.10

 


FX Market


At the Interbank, the Naira/USD spot rate depreciated by N5 to close at N307.00/$, while the SMIS rate remained unchanged at N358.51/$. At the I&E FX window, the Naira appreciated against the dollar by 21k to close at N367.57/$.


At the parallel market, cash and transfer rates depreciated by N2 and N5 to close at N378.00/$ and N410.00/$ respectively.


FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

307.00

306.95

CBN SMIS

358.51

358.51

I&E FX Window

367.57

367.78

Cash Market

378.00

376.00

Transfer Market

410.00

405.00

 


Eurobond


The NGERIA Sovereign tickers continued its bearish course, as yields continue to weaken across the curve. We noticed more Investors exit their long positions in droves across the curve, as Oil prices nose-dive to $30.98 per barrel, fueled by the wide-spread Coronavirus pandemic. Yields spiked by an average of c.54bps across the benchmark sovereign curve.


Similarly, the NGERIA Corps tickers traded on a bearish note, as yields continue to weaken among most tracked papers. The ACCESS 2021s and ETINL 2024s weakened by c.107bps and c.129bps respectively.


Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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