A Relatively Quiet Day For Fixed Income Markets As Treasury Bills Primary Market See Healthy Demand

Wednesday, May 27, 2020 / 9:22 PM / Zedcrest Capital / Header Image Credit: Ceditalk

FGN Bonds

The Bond Market resumed the short week on a very languid note. Offers were shown on most of the benchmark papers at the head and the tail of the curve while the auctions papers, especially 2050s which continued to garner strength settling around 12.55% levels. The belly of the curve witnessed a short squeeze, especially for the 2027s and 2028s maturities, which were mostly bided for a greater part of the trading session. Consequently, yields compressed by an average of c.2bps across the benchmark bond curve by market closing.

We expect to see improved demand from local investors in the market tomorrow, mainly supported by improved system liquidity from OMO maturity credits.

Treasury Bills

The treasury bills market was mainly bearish all day triggered by market liquidity squeeze witnessed in the interbank space. The market was offered on almost all OMO papers but most profound at the short and mid-dated papers (July to December), with the December maturities offered around 6.40% as rates expanded further by c.18bps across the OMO curve at the close of trading.

The NTB side traded on a quiet note, as market participants continue to show better offers on 31 May maturity at 3.40%, while all other maturities stayed muted for most of the trading session. Rates expanded at an average of c.20bps across the NTB curve. At the Primary Market Auction, the DMO sold a total of N59.37bn across the three maturities on offer, with rates dropping slightly for the 91 and 182 days' maturities while 364days closed about c.18bps higher than the last auction's close.

We expect improved demand in NTBs in tomorrow's session, as local investors look to fill-in lost bids at today's Primary Market Auction, further supported by inflows from OMO maturities.

Money Markets

Interbank rates stayed on the double-digits levels in the new week, dropping slightly by c.3bps (15.63%) on the OVN while the OBB remained at 15.00% levels. System Liquidity opened and stayed very low with estimated figures of c.N36BN by the close of the day.

We expect interbank rates to adjust into single-digits following OMO maturities credit to the interbank market tomorrow.

FX Market

The liquidity squeeze persisted in the I&E FX window this week as banks remained largely bided with few trades concluded by market participants, as rates remained unchanged compared to last week's closing. 

While most of the FX market segments also remained unchanged, we saw the Naira appreciate in the cash and transfer market by an average of N2.50k to close at N458/$ and N467/$ respectively.

Eurobonds

The NGERIA Sovereign tickers traded on a quiet note, although the market remained largely bullish across the curve as offers worsened across the curve. Yields compressed at an average of c.22bps, with gainers seen across the sovereign curve.

The NGERIA Corps tickers also traded on a very quiet note while we saw little activity on ACCESS 21 and ETINL 2024s. The market got hazy for these papers, as quotes seemed disjointed by participants. Most of the tracked papers weakened at the close of the session.

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