Anchoria Fixed Income Monitor: Bond Auction worth N60bn mops System Liquidity

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Wednesday, May 27, 2020 / 3:23 PM / By Anchoria AM Research / Header Image Credit: FBNQuest

 

Money Market

The average money market rate rose significantly last week by 12.23% to settle at 15.32% from 3.09% in the previous week. This is attributable to the outflow from FGN Bond auction worth N295.37 billion and CRR debits from banks by the Central bank.


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Other outflows for the week included: FX wholesale SMIS of $210mn and Biweekly retail FX sale while inflows were FAAC allocation of c. N300.00 billion, OMO Maturities of N296.2 billion and FGN Coupon payments of N17.87 billion.

 

We expect the system liquidity to be buoyant with N5.63billion FGN Bond coupon payments and OMO maturities of N319.72 expected during the week.


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Forex: USD/NGN

The Country's external reserve continues to experience expansion due to the inflow of rapid financing instrument from the IMF. The reserve is currently at $35.67 billion. The CBN official rate remained stable at N361.00/$ while the I&E FX Window fell marginally by 2bps to close at N385.94/$. Pressure persists in the parallel market as the rate rose by 1.32% to close N462.00/$.

 

We expect pressure in the foreign exchange market to reduce as crude oil price improves and the country's external reserve increases.


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Bond: FGN

The secondary sovereign Bond market closed bullish last week as the average yield fell by 15bps to close at 10.40% compared to 10.55% in the previous week. Yields declined across all instruments with the highest yield decline of 47bps witnessed in the MAR-2025.

 

The Sovereign Eurobond market closed on a strongly bearish note as the average yield rose by 139bps to close at 8.77% compared to 7.38% the previous week. The Corporate Eurobond market also closed bearish as the average yield rose by 318bps to close at 11.90% compared to 8.72% the previous week.

 

At the bond auction, the DMO offered a total of N60.00 billion across all instruments through re-openings – 12.75% APR 2023, 12.50% MAR 2035 and 12.98% MAR 2050 with stop rates at 9.20%, 11.70% and 12.60% respectively. (See next page for bond auction result).

            

We expect increase widening in bond yield and advise bond traders to retain cautionary approach in the market.

 

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Treasury Bills

The T-bills secondary market closed on a bullish note last week as the average yield fell by 11bps to close at 2.17% compared to 2.28% the previous week due attributable to investors demand for longer term instruments. In the same vein, OMO bills fell by 252bps to close at 6.02% compared to 8.45% the previous week.

 

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Commodities

Brent oil rose by 8.09% to close at $35.13 compared to $32.50 last week while WTI rose by 12.98% to close at $33.25. This is due to the increase in demand and supply now that countries have begun to ease coronavirus –related lockdown and restrictions.

 

The OPEC+ coalition appears determined to ease the global oil glut and lift the oil prices that had cratered in April because of OPEC+ wrangling and crashing global demand in the pandemic. Oil prices have rallied since the start of the new OPEC+ cuts.

 

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