Escalating Trade Tensions to Weigh on Domestic Fixed Income Yields

Proshare

Friday, August 23, 2019   /06:20PM  / By Zedcrest Capital / Header Image Credit: Money Marketing


 

Bid-Ask spreads in the bond market have grown further apart following the low volume of sales at the last auction. We however expect the market to maintain a slightly bearish stance in the week ahead, as markets react to the renewed escalation in the US-China Trade spat.

 

Below are highlights of trading activities in the fixed income and forex market today.

 

 

Bonds

The FGN Bond market traded on a relatively flat note, with yields marginally higher by c.2bps on the day.

We however witnessed few demand interests on select short and mid tenured bonds.

 

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.47

13.54

0.00

16.39 27-Jan-22

14.72

13.99

0.00

12.75 27-Apr-23

14.45

14.11

0.10

14.20 14-Mar-24

14.35

13.80

0.00

13.53 23-Mar-25

14.40

13.73

0.08

12.50 22-Jan-26

14.32

14.04

(0.05)

16.29 17-Mar-27

14.40

14.13

0.00

13.98 23-Feb-28

14.56

14.21

0.08

12.15 18-Jul-34

14.59

14.12

0.24

12.40 18-Mar-36

14.50

14.17

(0.12)

16.2499 18-Apr-37

14.64

14.28

0.00

14.80 26-Apr-49

14.64

14.50

(0.05)


Source: Zedcrest Dealing Desk
 

 

 

Treasury Bills

Yields in the T-Bills market moderated slightly today, with renewed demand interests on the mid to long end of the curve. This came on the back of the lack of an OMO sale in the previous session and expectations for FAAC inflows by traders in the new week.

 

We expect rates to remain relatively stable, with FAAC Payments to states expected to bolster liquidity levels in the new week. Renewed OMO auctions by the CBN would however pressure rates higher, even as c.N393bn OMO T-bills mature on Thursday.

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

12-Sep-19

14.85

11.00

0.00

3-Oct-19

14.85

13.50

0.00

14-Nov-19

14.70

12.20

0.00

5-Dec-19

14.70

13.20

0.05

2-Jan-20

14.50

14.10

(0.20)

6-Feb-20

14.50

13.80

(0.20)

19-Mar-20

14.50

12.50

(0.05)

2-Apr-20

14.60

12.75

(0.20)

14-May-20

14.25

12.50

(0.25)

04-Jun-20

14.25

12.75

0.00

02-Jul-20

14.25

12.75

0.00

13-Aug-20

13.00

12.35

(0.95)

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates in the money market moderated slightly as funding pressures eased. The OBB and OVN rates however remained elevated at 17.71% and 18.79%, as system liquidity remained depressed at c.N360bn negative.

 

We expect rates to trend slightly higher on Monday, as banks fund for the CBN wholesale FX auction.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

17.71

23.64

Overnight (O/N)

18.79

24.86

Source: FMDQ, Zedcrest

 

 

 

FX Market

At the interbank, the Naira/USD spot and SMIS rates remained stable at N360.95/$ and N357.96/$. The Naira depreciated further at the I&E window by 13k to close at N363.14/$. At the parallel market, the cash and transfer rates remained stable at N358.80/$ and N363.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

357.96

357.96

I&E FX Window

363.14

363.01

Cash Market

358.80

358.80

Transfer Market

363.00

363.00

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The NGERIA Sovereigns reversed prior session's gains with yields trending higher by c.7bps. This came on the back of an escalation in the US-China trade spat, which weighed on oil prices.

 

In the NGERIA corps, we witnessed continued selling interests in the ZENITH 22s, and some sell on the FIDBAN 22s as well. There was however some renewed interest in the ETINL 24s.

 

 

Proshare Nigeria Pvt. Ltd.


 

Proshare Nigeria Pvt. Ltd.

 

 

 

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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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