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DMO Raises 81.57% of Planned N150bn as Investors Demand Higher Yields

Bonds & Fixed Income	1085 VIEWS
Bonds & Fixed Income
1085 VIEWS

Thursday, January 21, 2021 / 8:27AM / By Zedcrest Capital / Header Image Credit: iStock

FGN Bonds

The FGN bonds market held its breath in today's session as traders anticipated the FGN Bond primary market auction results. Yields across the benchmark curve remained mostly unchanged from the previous day, with improved offers at the mid- to long-end of the curve, as sentiments for a bearish auction result amplified throughout the trading session. Consequently, yields expanded by an average of c.4bps across the benchmark curve.

At the bond auction, the DMO raised a total of c. N122.36bn (81.57% of the total offered amount) across the three tenors offered despite a total bid-to-cover ratio of 2.12X. Stop rates reflected secondary market trading levels, albeit the 2035 and 2045 papers closed c.187bps higher than the December auction stop rates.

We expect a cautious trading session opening tomorrow, as the market reacts to the FGN bond auction results.

FGN Bonds Auction Result- Jan. 20, 2021
Maturity	Rate (%)	Offer (N'bn)	Sub (N'bn)	Sale (N'bn)	Previous Rate (%)	Change
Mar-27s	7.98	50.00	91.84	49.40	0.00	0.0000
Mar-35	8.74	50.00	106.37	57.93	6.945	+1.7950
Jul-45	8.95	50.00	40.07	15.03	7.000	+1.9500

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
16.39 27-Jan-22	3.94	1.47	(0.03)
12.75 27-Apr-23	5.50	2.92	0.04
14.20 14-Mar-24	6.20	3.80	0.00
13.53 23-Mar-25	7.05	5.00	(0.01)
12.50 22-Jan-26	8.28	6.15	0.22
16.29 17-Mar-27	8.10	6.19	(0.01)
13.98 23-Feb-28	8.29	7.67	0.00
14.55 26-Apr-29	8.55	7.87	0.00
12.15 18-Jul-34	9.61	8.85	0.00
12.50 27-Mar-35	9.73	8.65	0.00
12.40 18-Mar-36	9.61	8.80	0.00
16.2499 18-Apr-37	9.52	8.80	0.00
9.80 24-Jul-45	9.91	8.53	0.32
14.80 26-Apr-49	10.23	9.03	0.00
12.98 27-Mar-50	10.26	8.90	0.00

Treasury Bills

We saw improved trading activity in treasury bills space supported with an active demand for mid-and long-dated bills, which were offered at attractive levels in the market. August, September and October 2021 bills saw most of the market volumes with trade crossed at 0.75%,0.95%, and 1.00% respectively. 04th January 2021 bill was also in high demand during today's session, trading at 2.10% at the early hours of the session, albeit buyer's appetite waned gradually when offers began to drop below the 2% mark.

We expect local banks to continue to cherry-pick on any available bill offered at an attractive level while awaiting long dated OMO bills supply by offshore participants from their anticipated OMO winnings from tomorrows auction.

Benchmark OMO Bills
Description	Bid (%)	Offer (%)	Day Change (%)
NGOMOB 0 02/02/21	8.00	0.03	0.00
NGOMOB 0 03/02/21	8.00	0.03	0.00
NGOMOB 0 05/11/21	8.00	0.04	0.00
NGOMOB 0 06/08/21	8.00	0.04	0.00
NGOMOB 0 08/10/21	8.00	0.04	0.00
NGOMOB 0 09/07/21	8.00	0.04	0.00
NGOMOB 0 10/19/21	8.00	0.05	0.00
NGOMOB 0 11/02/21	8.00	0.05	0.00
NGOMOB 0 12/07/21	8.00	0.05	0.00
Benchmark NTBills
Description	Bid (%)	Offer (%)	Day Change (%)
NIGTB 0 01/14/21	8.00	0.03	0.00
NIGTB 0 02/11/21	8.00	0.03	0.00
NIGTB 0 03/11/21	8.00	0.03	0.00
NIGTB 0 04/29/21	8.00	0.04	0.00
NIGTB 0 05/13/21	8.00	0.04	0.00
NIGTB 0 06/10/21	8.00	0.04	0.00
NIGTB 0 07/01/21	8.00	0.04	0.00
NIGTB 0 08/26/21	8.00	0.04	0.00
NIGTB 0 09/09/21	8.00	0.05	0.00
NIGTB 0 10/14/21	8.00	0.05	0.00
NIGTB 0 11/11/21	8.00	0.05	0.00
NIGTB 0 01/14/21	8.00	0.03	0.00
NIGTB 0 02/11/21	8.00	0.03	0.00

Money Markets

OBB and OVN rates increased by an average of c.31bps, closing the day at 0.50% and 1.00%, respectively, despite the market being awash with liquidity. System figures are estimated at c.N586.24B positive closing the day.

We expect the funding rates to remain steady tomorrow as we do not anticipate any significant funding activity by local banks.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	0.50	0.38
Overnight (O/N)	1.00	0.50

FX Market

The I&E FX Market received a good boost from exporters as we saw intra-day trading volumes jumped up by over 234% to close at c.$89.50mio. Despite this support, we saw the closing rate depreciate by N0.82k while the bid range amongst banks widened by approximately N19.00 D/D.

At the parallel markets, the cash segment depreciated by N1.00 due to the FX supply shortage, although the transfer segment stayed flat at N485/1$.

FX Market
	Current (N/$)	Previous (N/$)
CBN Spot	379.00	379.00
CBN SMIS	380.69	380.69
I&E FX Window	394.17	393.35
Cash Market	474.00	473.00
Transfer Market	485.00	485.00

Eurobonds

The NIGERIA Sovereign tickers continued a bullish run from yesterday's session opening and staying green on most of the bonds offered. We saw few aggressive bids on most bond papers, especially for the short and longer-dated ones, consequently causing the yield to compress D/D by an average of c.2bps across the curve. At the SSA space, Angola's bond continued to gain positive vibes on the back of increasing oil prices (Brent crude $56.65) and a peaceful Presidential inauguration ceremony in the USA.

At NIGERIA Corps, tickers traded in a similar pattern as the sovereign papers, with just one of the tracked bonds moving in opposite directions based on market interest. By and Large, we noted the most significant movement on FIDBAN 22s and SEPLLN 22s, which compressed by -c.22bps and -c.71bps, respectively.

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