CBN Maintains OMO Auction Rate for Third Consecutive Time, Eases Market Sentiments

Proshare

 Tuesday, September 10, 2019 / 9:00AM / Zedcrest Capital / Header Image Credit: Premium Times Nigeria

 

At the OMO auction, the Apex bank sold a total of N183.64bn across three maturities. The CBN maintained stop rates across the 80-, 185- and 346-day tenors at 11.59%, 11.79% and 13.50% respectively. Demand again was skewed to 346-day tenor, with a bid-to-cover ratio of 2.11X.

 

We expect the current bullish trend to be short-lived as concerns for rising rates remain stem despite following the CBN's third consecutive auction at these levels. Market participants will look to the forthcoming PMA and OMO auctions expected later in the week to provide guidance on the direction of short term interest rates.

 

Below are the highlights of trading activities in the fixed income and forex market on September 09, 2019.


Bonds

The FGN Bond market opened the week on a positive note, as yields closed lower by c.2bps on average across the curve. While demand at the short- and mid-end of the curve persisted, we noticed continued apathy for duration from investors with relatively low volumes crossed during the trading session.

 

We remain cautious to take on risk at these levels, as global uncertainties from US-China trade tensions, US accusations of a 'currency war' by the ECB, a week ahead of the US FED's FOMC opportunity to respond to a slowing economy.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.27

13.90

0.12

16.39 27-Jan-22

14.44

14.07

(0.03)

12.75 27-Apr-23

14.43

14.28

0.03

14.20 14-Mar-24

14.28

13.98

(0.07)

13.53 23-Mar-25

14.28

13.84

(0.05)

12.50 22-Jan-26

14.26

14.13

(0.10)

16.29 17-Mar-27

14.20

14.13

(0.06)

13.98 23-Feb-28

14.22

14.12

(0.04)

12.15 18-Jul-34

14.58

14.40

(0.03)

12.40 18-Mar-36

14.64

14.41

0.03

16.2499 18-Apr-37

14.65

14.42

0.00

14.80 26-Apr-49

14.59

14.49

(0.02)


Source: Zedcrest Dealing Desk 

 

Treasury Bills

Activities in the Treasury Bills commenced on a positive note, as we noted demand across the NTBills curve supported by buoyant system liquidity. Yields across the Benchmark NTB curve compressed by c.39bps on the average, despite supply from an OMO auction floated by the CBN. 

 

OMO Auction Results - 9 Sept. 2019

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn) 

80-days

11.59

20.00

5.14

0.15

185-days

11.79

30.00

13.89

2.13

346-days

13.50

100.00

211.36

181.36

 

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

12-Sep-19

12.00

11.75

(0.80)

3-Oct-19

12.75

11.55

(0.25)

14-Nov-19

12.45

11.50

(0.55)

5-Dec-19

12.65

12.45

(0.65)

2-Jan-20

12.75

12.30

(0.25)

6-Feb-20

12.50

12.00

(0.50)

19-Mar-20

13.00

12.65

(0.30)

2-Apr-20

13.25

12.95

(0.25)

14-May-20

13.30

12.80

(0.20)

04-Jun-20

13.20

12.50

(0.45)

02-Jul-20

13.50

13.25

(0.05)

13-Aug-20

12.00

11.75

(0.80)

Source: Zedcrest Dealing Desk 

 

Money Market

Rate in the money market increased off the back of funding pressures from FX and OMO Auctions caused a dip in system liquidity. The OBB and OVN rates closed the session at 7.14% and 8.31% respectively, as system liquidity remained well in positive territory at c.N161.16bn.

 

We expect rates to oscillate in tandem with system liquidity, as we anticipate another OMO auction by the CBN to mop up OMO maturities of at least c.N348bn later in the week.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

7.14

3.21

Overnight (O/N)

8.31

3.86

Source: FMDQ, Zedcrest 

 

FX Market

At the interbank, the Naira/USD spot and SMIS rates remained stable at N306.90/$ and N358.02/$. At the I&E window, the Naira reversed the previous session's gains, depreciating by 11k to close at N362.18/$. At the parallel market, the cash and transfer rates remained stable at N357.70/$ and N362.50/$ respectively.

FX Market

 

Current (N/$)

Previous

(N/$)

CBN Spot

306.90

306.90

CBN SMIS

358.02

358.04

I&E FX Window

362.18

362.08

Cash Market

357.70

357.70

Transfer Market

362.50

362.50

Source: CBN, FMDQ, REXEL BDC 

 

Eurobonds

The NGERIA Sovereigns strengthened in today's trading session, as yields compressed by c.7bps on the average across the curve. Positive sentiments towards the country's papers followed improved oil prices as New Saudi Minister signaled OPEC+ will continue output cuts.

 

Trading was mixed across the tracked NGERIA Corps papers in today's trading session, as we witnessed gains on the ETINL 2024 (15bps) while the UBANL 2022 and FIDBAN 2022 expanded by 5bps and 13bps respectively.



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Proshare Nigeria Pvt. Ltd.




Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.

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