Coupon Payments to Sustain Demand Interests on FGN Bonds

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Friday, July 12, 2019   /  06:00PM  /  Zedcrest Capital / Header Image Credit: Biz Watch Nigeria

 

The FGN Bond market traded on a relatively stable note, with yields marginally lower by c.1bp. This was in contrast to the significant downtrend in yields witnessed in the previous session. 

In the coming week, we expect yields to remain relatively stable, with coupon payments worth c.N100bn on the FGN 2021 and 2034 bonds expected to sustain investors’ demand for bonds in the market. Market players are however cautious with yields at current levels, as we await release of the Q3 FGN bond calendar by the DMO. 

Below are the highlights of trading activities in the Fixed Income and Forex Market today. 

 

Bonds

Activities in the bond market were relatively stable, with yields marginally lower following CBN’s revised SDF guidelines. 

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Treasury Bills

The T-bills market remained slightly bullish, with improved offers witnessed on some mid and long tenors (Mar – Jul), as the declining rates found support at 11.00% on that end of the curve. 

We however expect rates to remain depressed in the near term, due to the continued absence of an OMO auction by the CBN.


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Money Market

 

Rates in the money market dipped further by c.1pct, on the back of the robust system liquidity levels from the OMO maturities in the previous session. The OBB and OVN rates consequently ended the session at 2.21% and 2.93%, with system liquidity estimated to close the week at c.N334bn positive.

 

We expect rates to remain relatively stable in the coming week, barring a resumption in OMO by the CBN.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

2.21

3.00

Overnight (O/N)

2.93

3.64

Source: FMDQ, Zedcrest

 

 

FX Market

At the interbank, the Naira/USD rate remained stable at N307.00/$ (spot) and N357.52/$ (SMIS). The NAFEX rate at the I&E window rose marginally higher by 3k to N360.79/$. At the parallel market, the transfer rate dipped by N1 to N361.50/$, while the cash rate remained stable at N358.50/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

307.00

307.00

CBN SMIS

357.72

357.72

I&E FX Window

360.79

360.76

Cash Market

358.50

358.50

Transfer Market

361.50

362.50

Source: CBN, FMDQ, REXEL BDC 

 

Eurobonds

The NGERIA Sovereigns weakened slightly, with yields marginally higher by c.4bps, following a slowdown in demand interests from the firm rally witnessed post the ‘Powell comments’ on the possibility for a FED rate cut later this month. 

In the NGERIA Corps, Ecobank announced it will call back its bonds totaling $250m and maturing in 2021 on the 14th of August 2019. Demand interests remained sustained across other tickers, with the FIDBAN 22s the most on bid. 


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