CBN Keeps OMO Rates Steady Despite Doubling Issue Volumes Amidst Buoyant System Liquidity

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Friday, February 26, 2021 / 8:33 AM / By Zedcrest Capital / Header Image Credit: Getty Images


Proshare Nigeria Pvt. Ltd.

 

FGN Bonds

The recent bull run in the FGN Bond market eased off the gas in today's session, as market participants kept a watchful eye on the CBN's action at its OMO auction and the direction of short-term rates. Offers improved across the bond curve, most especially at the belly and tail ends. Quoted spreads on the 2029s paper compressed, with the bonds eventually changing hands at 10.30% levels for most of the day. Offers at the long-end improved, with the 2037s offered at 11.05% and the 2049s at 11.10% but lacking much enthusiasm from buyers. Consequently, yields compressed by c.2bps on the average across the FGN benchmark curve.

 

We expect the market to close the week on a muted note, with sellers expected to improve offers to try to entice interest from investors at these levels.

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

8.99

6.67

(0.01)

14.20 14-Mar-24

8.84

6.99

(0.15)

13.53 23-Mar-25

10.15

7.96

(0.05)

12.50 22-Jan-26

10.12

9.38

(0.13)

16.29 17-Mar-27

10.39

9.62

(0.20)

13.98 23-Feb-28

10.48

10.01

(0.19)

14.55 26-Apr-29

10.63

10.20

0.00

12.15 18-Jul-34

11.35

11.00

0.10

12.50 27-Mar-35

11.35

11.05

0.10

12.40 18-Mar-36

11.22

11.00

(0.03)

16.2499 18-Apr-37

11.33

11.05

0.08

9.80 24-Jul-45

11.49

11.11

0.24

14.80 26-Apr-49

11.64

11.05

0.00

12.98 27-Mar-50

11.65

11.00

0.00

 

Treasury Bills

The T-bills market held its breath for most of today, as market participants fixed their gaze on the CBN's OMO auction. Offers for the long-dated OMO bills (February maturities) improved to 9.00% for most of the session, but there were no takers seen at those levels. The newly issued NTBs were also offered for most of the session, with investors again shrugging off bills showing a sustained expectation for the continued rise in rates in the interim.

 

At the auction, the CBN sold a total of N330Bn in OMO bills across the three maturities on offer, more than double the offered amount at the previous week's auction as it looked to mop up excess system liquidity. Despite the increased offer, the Apex bank was able to maintain the stop rates at 7.00%, 8.50% and 10.10% for the 96-, 173- and 362-days respectively as demand at the auction was healthy with an average bid-to-cover ratio of 1.40X across the offered tenors.

 

With residual liquidity still present in the system, we expect the market to close the week on an active note with some of the newly issued bills on offer tomorrow.

 

Primary Market Auction Result

OMO - February 25, 2020

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

Previous Rate (%)

Changes

96 days

7.0000

50.00

45.46

50.00

7.0000

0.0000

173 days

8.5000

50.00

54.06

50.00

8.5000

0.0000

362 days

10.1000

230.00

504.98

230.00

10.1000

0.0000

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 03/02/21

11.00

0.03

0.00

NGOMOB 0 05/11/21

11.00

0.03

0.00

NGOMOB 0 06/08/21

11.00

0.03

0.00

NGOMOB 0 08/10/21

12.00

0.05

0.00

NGOMOB 0 09/07/21

12.00

0.05

0.00

NGOMOB 0 10/19/21

12.00

0.07

0.00

NGOMOB 0 11/02/21

12.00

0.07

0.00

NGOMOB 0 12/07/21

13.50

0.07

0.00

NGOMOB 0 01/13//22

12.00

0.07

0.00

 

Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 03/11/21

11.00

0.03

0.00

NIGTB 0 04/29/21

11.00

0.03

0.00

NIGTB 0 05/13/21

11.00

0.03

0.00

NIGTB 0 06/10/21

11.00

0.03

0.00

NIGTB 0 07/01/21

12.00

0.05

0.00

NIGTB 0 08/26/21

12.00

0.05

0.00

NIGTB 0 09/09/21

11.00

0.05

0.00

NIGTB 0 10/14/21

12.00

0.07

0.00

NIGTB  0 11/11/21

12.00

0.07

0.00

NIGTB  0 01/11/22

13.50

0.07

0.00

 


Money Markets

System liquidity took a hit today as debits from recent treasury bills auctions (NTB and OMO) pushed the interbank to close at c.N291Bn (c.57.77% lowered D/D). Money market rates consequently moved higher, rising by c.629bps to close the session at 7.60% and 8.30% for Open Buy-Back (OBB) and Overnight (O/N) rates respectfully.

 

We expect rates to remain elevated to close the week, as debits via CRR are expected to further drain system liquidity tomorrow.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

7.60

1.50

Overnight (O/N)

8.30

1.83

 

 

FX Market

Supply remained worsened in the I&E FX window, with the traded volume at c.$44million (79% drop D/D). Most participants were bided between N382.00/$ and N415.00/$ with closing rated rates appreciating by c.0.13% D/D. The Naira also gained at the parallel markets, with the cash rate appreciating by c.0.31% to close at N477.00/$ while the transfer rate remained unchanged.

 

FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

408.67

408.80

Cash Market

477.00

478.50

Transfer Market

492.00

492.00



Eurobonds

The NIGERIA Sovereigns pulled back some of the previous day's gains, in what has been a topsy-turvy week for the SSA sovereign space in general. We saw selling action across the sovereign curve for most of the session, with yields rising by c.2bps on the average by the session's close.

 

The NIGERIA Corporates had an uncharacteristically quiet session coughed up some of the recent gains posted, as sellers offloaded most of the tracked papers for most of the season. The ACCESS 2021s and SEPLLN 2023s led the losers' chart, as yields on both papers increased by c.65bps and c.72bps respectively.


Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd. 



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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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