Double Whammy: Central Bank Shocks The Market With Slashes To MPR And OMO Rates

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Friday, May 29, 2020 / 8:30 AM / By Zedcrest Capital / Header Image Credit: MChamber


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FGN Bonds

It was a rather slow day in the bond space, with activities dragging for most of the trading session with the market focused on the MPC meeting. Few offers were noted on 2023s and 2024s as at the open with trades settling around 8.85% and 8.90% for both papers respectively. By mid-day, interests shifted to mid- and long-dated maturities albeit short-lived as market activities re-entered a snooze mood to the close the session. Yields compressed slightly, by an average of c.1bps across the benchmark curve compared to yesterday's closing levels.

At the MPC meeting, the CBN governor announced a whooping 100bps cut to the MPR (from 13.50% to 12.50%), a move not anticipated by the market. Consequently, we expect an exciting session tomorrow as the impact of the cut should move yields downward especially at the head and belly of the curve.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

7.83

4.58

(0.04)

 

16.39 27-Jan-22

9.00

5.14

(0.08)

 

12.75 27-Apr-23

9.30

8.69

(0.04)

 

14.20 14-Mar-24

9.45

8.36

0.05

 

13.53 23-Mar-25

9.30

8.61

(0.02)

 

12.50 22-Jan-26

10.57

9.94

0.00

 

16.29 17-Mar-27

11.05

10.07

0.08

 

13.98 23-Feb-28

11.13

10.34

0.09

 

14.55 26-Apr-29

11.21

10.66

0.00

 

12.15 18-Jul-34

11.56

11.19

0.00

 

12.40 18-Mar-36

11.56

11.28

(0.13)

 

16.2499 18-Apr-37

11.61

11.24

0.00

 

14.80 26-Apr-49

12.70

12.33

0.00

 

 

Treasury Bills

Treasury Bills market remained in its hushed mood, especially with attention shifting to the OMO auction floated by the Apex bank. The market was largely bearish as better offers were shown across the OMO curve while yields expanded further by an average of c.18bps. At the OMO auction, the apex bank sold a total of c.N114bn across all the tenors on offer, with stop rates dropping by an average of c.334bps to single digits compared to the previous the auction.

Contrary to the OMO bills, the NTB market saw a bit of light as demand picked up from yesterday's primary market for the auction bills particularly on the newly issued 182-day maturity driven by retail demand in the market.

With both rate cuts (OMO stop rates and MPR) we expect to see healthy volumes pass through the market tomorrow as demand should pick-up, especially on the newly issued OMO bills, supported by robust system liquidity.

 

OMO Auction  Results - 28 May 2020

Tenor

Rate (%)

Offer (₦'bn)

Sub (₦'bn)

Sale (₦'bn)

Previous Rate (%)

Changes

82-days

7.00

50.00

67.20

4.00

11.50

-4.50

180-days

8.75

50.00

57.50

50.00

11.54

-2.79

348-days

9.90

60.00

230.32

60.00

12.64

-2.74

 

 Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOM 6/4/2020

7.00

1.50

0.00

NGOM 7/2/2020

7.04

1.50

0.04

NGOM 8/13/2020

8.13

1.50

0.13

NGOM 9/3/2020

8.17

1.50

0.17

NGOM 10/1/2020

8.22

1.50

0.22

NGOM 11/03/2020

8.28

1.50

0.28

NGOM 12/01/2020

9.42

1.20

0.17

NGOM 01/05/2021

9.51

1.20

0.26

NGOM 02/02/2021

10.72

1.50

0.22

NGOM 03/02/21

10.81

1.50

0.31

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 2-Jul-20

4.00

0.10

0.00

NIGTB 1-Oct-20

4.05

0.10

0.00

NIGTB 12-Nov-20

5.11

0.15

0.11

NIGTB 14-Jan-21

5.16

0.10

0.00

NIGTB 11-Feb-21

5.18

0.20

0.00

 

Money Markets

There was some respite in the Interbank Market, as inflows from matured OMO bills of c.N303bn impacted system liquidity, crashing rates by c.1225bps despite an OMO auction. OBB and OVN rates closed at 2.67% and 3.42% respectively, as system liquidity is estimated to close at c.N510.26bn positive. 

We expect rates to remain in the single-digit corridor, with no significant funding pressure in the market tomorrow.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

2.67

15.00

Overnight (O/N)

3.42

15.60

  

FX Market

The I&E FX window remained poorly supplied with little volumes (c.$22m) passing through the market, while most participants were bided between N383.00/$ and N387.00/$ causing the closing rate to depreciate by 0.10% D/D. 

Contrary to the I&E FX window, we saw the Naira appreciate in the cash and transfer market by an average of N6.00k to close at N449/$ and N464/$ respectively.


FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

361.00

361.00

CBN SMIS

380.69

380.69

I&E FX Window

386.33

385.94

Cash Market

449.00

458.00

Transfer Market

464.00

467.00

 

Eurobonds

The NGERIA Sovereign tickers traded on a discreet note, although we saw mixed sentiments on the benchmark curve i.e. bullish at the head and belly of the curve while the tail was slightly bearish. However, yields compressed by an average of c.3bps for across the sovereign curve. 

The NGERIA Corps tickers also had a quiet session, with the only movement on the day among tracked papers seen on Zenith 2022s and FIDBAN 2022s which strengthened by c.1bps apiece.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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