Drab Trading Activity As The Markets Reacted To Low System Liquidity

Proshare

Sunday, May 23, 2020 / 7:50 PM / by Zedcrest Capital / Header Image Credit: ARM


Proshare Nigeria Pvt. Ltd.


FGN Bonds

The FGN bond market continued its bullish run to end the week, as interest shifted away from auction bonds to other papers offered at attractive levels. We noted slight buy pressure not only on short-dated maturities (2023s & 2026s) but also on duration extended bonds papers (2029s and 2049s). With this, yields adjusted further from yesterday's closing thus compressing by an average of c.9bps across the curve.

Albeit a short trading week due to the holidays, we expect activity to pick up next week as OMO maturities (c. N308bn) should support demand from local investors.


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

7.88

4.71

(0.04)

 

16.39 27-Jan-22

9.09

5.26

(0.02)

 

12.75 27-Apr-23

9.19

8.71

(0.35)

 

14.20 14-Mar-24

9.40

8.45

(0.15)

 

13.53 23-Mar-25

9.33

8.62

0.00

 

12.50 22-Jan-26

10.58

10.01

0.00

 

16.29 17-Mar-27

10.97

10.17

(0.18)

 

13.98 23-Feb-28

11.04

10.34

(0.18)

 

14.55 26-Apr-29

11.37

10.90

(0.08)

 

12.15 18-Jul-34

11.71

11.02

(0.01)

 

12.40 18-Mar-36

11.73

11.28

0.00

 

16.2499 18-Apr-37

11.72

11.24

(0.11)

 

14.80 26-Apr-49

12.70

12.37

0.00

 

  

Treasury Bills

The Treasury Bills market closed out the week with improved activity, with bearish sentiments witnessed on short- to mid-dated OMO bills, as depressed system liquidity caused market players to sell-off bills to provide short-term liquidity rather than take in the Interbank Market at higher rates. Rates further expanded by c.8bps across the benchmark OMO curve.

The NTB side also closed on a grim outlook, as the local investors steered clear even though we saw better offers especially on the longest maturities at 3.50%.

We expect better appetite in the treasury bills market next week, supported by improved system liquidity and better offers on treasury bills papers.


Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOM 6/4/2020

6.50

2.75

0.50

NGOM 7/2/2020

4.00

0.10

0.00

NGOM 8/13/2020

7.25

3.00

0.25

NGOM 9/3/2020

7.00

4.50

0.00

NGOM 10/1/2020

7.00

5.00

0.00

NGOM 11/03/2020

5.00

0.10

0.00

NGOM 12/01/2020

8.25

6.00

0.25

NGOM 01/05/2021

8.25

5.50

0.25

NGOM 02/02/2021

5.00

0.10

0.00

NGOM 03/02/21

9.00

5.00

0.00



Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 2-Jul-20

4.00

0.10

0.00

NIGTB 1-Oct-20

5.00

0.10

0.00

NIGTB 12-Nov-20

5.00

0.10

0.00

NIGTB 14-Jan-21

5.00

0.20

0.00

NIGTB 11-Feb-21

5.00

0.25

0.00

 

Money Markets

Interbank rates jumped into the double-digits today, increasing by an average of c.130bps to close at 15.00% and 15.63% for the OBB and OVN rates. System Liquidity is estimated to close at c.N102.29BN following Retail FX intervention (c.N150Bn), FGN Bonds funding (c.N315Bn), and additional CRR (c.354bn) debits by the Apex bank.

We expect interbank rates to open high majorly because of possible CBN FX wholesale auction but ease lower later in the week as OMO maturities of c.N308Bn are expected to support system liquidity.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

15.00

1.42

Overnight (O/N)

15.63

2.00

 


FX Market

The liquidity squeeze persevered in the I&E FX window this week as banks were mostly buyers, with very few trades consummated causing the closing rate to depreciate by 0.15% to close at N386.50/$. 

Other FX market segments remained unchanged with little or no activity passing through these windows to significantly affect rates.

 

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

361.00

361.00

CBN SMIS

380.69

380.69

I&E FX Window

386.50

385.94

Cash Market

460.00

460.00

Transfer Market

470.00

470.00

 

Eurobonds

The NGERIA Sovereign ended the week on a rather hushed note, as market attention shifted to the newly issued Egypt sovereign Eurobonds which continued to garner investor love for a second consecutive session. We noted improved offers on the NGERIA sovereign papers, with yields expanding by an average of c.19bps across the curve. 

The NGERIA Corps tickers also followed suit in a drab last session to close the week. Yields rose across most of the tracked papers, with the exception of the UBA 2022s with posted gains of c.30bps.


  Proshare Nigeria Pvt. Ltd.



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