A Tale of Two Halves: Bullish Sentiments for Bonds Reverse Upon Bond Auction Offer Release

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Wednesday, September 18, 2019 / 08:42 AM / By Zedcrest Capital / Header Image Credit: The Life and Annuity Shop, LLC


Below were highlights of trading activities in the fixed income and forex market on September 17, 2019

 

Bonds

The Bond market started the trading session on a bullish note, as investors looked to re-invest coupon payments received this week. We noted increased demand for duration as investors traded at the long-end of the benchmark bond curve at 14.45% levels.

Sentiments however turned a few minutes to the close of the trading session, as market participants sold-off bonds upon the release of the September 2019 FGN Bond offer circular. The DMO looks under some pressure to raise funding for the national budget, as it increased the offer amount by N5bn to a total of N100bn across the 5-, 10- and 30-year re-openings.

Yields consequently expanded by c.10bps on the average across the FGN benchmark curve to close the trading session.

 

We expect the bearish sentiments in the market to continue leading up to the FGN Bond auction scheduled for September 25, 2019.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.56

13.76

0.29

16.39 27-Jan-22

14.50

13.56

0.20

12.75 27-Apr-23

14.40

14.29

(0.06)

14.20 14-Mar-24

14.36

13.74

0.08

13.53 23-Mar-25

14.33

13.66

0.27

12.50 22-Jan-26

14.35

13.99

0.04

16.29 17-Mar-27

14.31

13.96

0.05

13.98 23-Feb-28

14.58

14.01

0.34

12.15 18-Jul-34

14.63

14.40

0.08

12.40 18-Mar-36

14.50

14.40

(0.10)

16.2499 18-Apr-37

14.53

14.34

(0.05)

14.80 26-Apr-49

14.72

14.49

0.11


Source: Zedcrest Dealing Desk

 

Treasury Bills

The T-bills market already traded mixed during today’s sentiments in light of sustained tight liquidity. We noted demand interests on some select short-dated maturities, while better sellers remained at the mid- to long-end of the NTBills benchmark curve.

 

At the coming PMA auction tomorrow, we expect the 91-day and 182-days stop rates to clear lower due to the retail volume on offer while institutional demand is expected to remain skewed towards to 1-yr bill.

 

NTB Auction Expectation - 18 Sept. 2019

Tenor

Previous Stop Rate (%)

Offer (N'bn)

Expectation

(%)

 

91 day

11.10

3.00

11.00 - 11.25

 

182 day

11.799

8.39

11.50 - 11.85

 

364 day

13.286

168.36

13.10 - 13.35

 

 

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Oct-19

12.60

12.00

(0.10)

14-Nov-19

12.65

12.00

(0.05)

5-Dec-19

12.50

12.20

0.00

2-Jan-20

13.00

12.40

0.40

6-Feb-20

13.00

12.35

0.00

19-Mar-20

12.30

12.10

(0.20)

2-Apr-20

13.10

12.90

0.10

14-May-20

13.10

12.55

(0.15)

04-Jun-20

13.40

12.75

0.00

02-Jul-20

13.40

12.75

0.05

13-Aug-20

13.50

13.30

0.00


Source: Zedcrest Dealing Desk


Money Market

Inflows from FGN bond coupon payments have eased up some liquidity in the interbank system, reducing Money Market rates by almost half from the previous trading session. System liquidity opened at c.N22.41bn positive, coming back from negative levels. OBB and OVN rates consequently ended the day lower at 17.00% and 18.29% respectively.

 

We expect money market rates to maintain this downward trend as more inflows from OMO maturities and FGN bond coupons are expected to ease system liquidity.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

17.00

33.86

Overnight (O/N)

18.29

36.36

Source: FMDQ, Zedcrest

 

 

FX Market

At the interbank, the Naira/USD spot and SMIS rates remained stable to close at N306.90/$ and N358.02/$ respectively. At the I&E window, the closing rate for the Naira gained 4k to close the trading session at N362.29/$.

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

 

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.90

306.90

CBN SMIS

358.02

358.02

I&E FX Window

362.29

362.32

Cash Market

357.60

357.60

Transfer Market

362.50

362.50

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The NGERIA Sovereigns received some positive interests from investors as Nigeria looks poised to benefit from a sustained outage of supply in the aftermath of the drone attacks on Saudi Arabia's Aramco facilities. We noted better buyers across the sovereign curve, as yields compressed by c.5bps on the average.

 

The jury is still out for NGERIA Corps, as investors continue to weigh in possibility of further early redemption of the outstanding papers. We noted little flows in the tracked papers.



Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.



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