FGN Bond Market Stays Bearish as December 2020 Inflation Soared to a 32 Months-High

Proshare

Sunday, January 17, 2021 / 6:40 AM / Zedcrest Capital / Header Image Credit: Capital


 Proshare Nigeria Pvt. Ltd.


Below are highlights of trading activities in the fixed income and forex market on January 15, 2021 

 

FGN Bonds

The FGN Bonds market closed the week on a bearish note, clocking five consecutive days of persistent yield increase with no respite (It was a firmly bearish week!!!). This sentiment was further fueled by the December 2020 Inflation figures' release, which printed at 15.75%, approximately 86bps above the previous month's figure. Yields on the belly of the FGN Bond curve reacted the most on the day (2034s and 2037s maturities), as bearish sentiments spooked yields upwards by an additional 25bps to settle at 8.95%.

 

We expect the market to trade cautiously, heading into the new week, as the scheduled monthly Bond auction and MPC meeting take center stage.


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

16.39 27-Jan-22

2.88

1.58

(0.04)

 

12.75 27-Apr-23

5.48

2.95

(0.01)

 

14.20 14-Mar-24

6.22

3.82

0.00

 

13.53 23-Mar-25

7.56

5.29

(0.26)

 

12.50 22-Jan-26

8.06

6.15

0.00

 

16.29 17-Mar-27

8.62

6.35

(1.08)

 

13.98 23-Feb-28

8.30

7.00

(1.33)

 

14.55 26-Apr-29

8.34

7.50

(0.01)

 

12.15 18-Jul-34

9.15

8.20

(0.11)

 

12.50 27-Mar-35

9.51

8.20

0.22

 

12.40 18-Mar-36

9.56

8.20

0.00

 

16.2499 18-Apr-37

9.10

8.20

0.00

 

9.80 24-Jul-45

9.59

7.18

0.00

 

14.80 26-Apr-49

10.23

8.75

(0.16)

 

12.98 27-Mar-50

10.26

8.75

0.00

 

 

Treasury Bills

The Treasury bills space witnessed a slight uptick in trading activity today as offshore investors continue to offload their OMO T-bills holdings. Most of the trading activity was on the new 1-year OMO T-bills, with trades crossed between 2.30%-2.50%. We also witnessed slight interest in mid-dated OMO T-bills by local banks; however, offer yields were very unattractive to decent-sized buyers, making it challenging to cross transactions. The benchmark OMO and NTB curves remained flat D/D.

 

We expect the market to remain order-driven in the coming weeks as local appetite is expected to match-off offshore players seeking to take profit on long-dated OMO T-bills maturities.


Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 02/02/21

8.00

0.02

0.00

NGOMOB 0 03/02/21

8.00

0.02

0.00

GOMOB 0 05/11/21

8.00

0.03

0.00

NGOMOB 0 06/08/21

8.00

0.03

0.00

NGOMOB 0 08/10/21

8.00

0.03

0.00

NGOMOB 0 09/07/21

8.00

0.03

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

0.02

0.00

NIGTB 0 02/11/21

8.00

0.02

0.00

NIGTB 0 03/11/21

8.00

0.03

0.00

NIGTB 0 04/29/21

8.00

0.03

0.00

NIGTB 0 05/13/21

8.00

0.03

0.00

NIGTB 0 06/10/21

8.00

0.03

0.00

NIGTB 0 07/01/21

8.00

0.03

0.00

NIGTB 0 08/26/21

8.00

0.03

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

0.02

0.00

NIGTB 0 02/11/21

8.00

0.02

0.00

 

Money Markets

Interbank rates remained relatively stable closing the week despite the remittance of statutory payments by local banks to the CBN, which had been provided for earlier in the week. Consequently, OBB and OVN rates closed at 0.50% and 1.00%, respectively.

 

We expect funding rates to remain within the low single-digit region heading into the new week. Cash inflows from bond coupons and OMO T-bills maturity would likely boost system liquidity barring any liquidity tightening event.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

0.50

0.75

Overnight (O/N)

1.00

1.25

 

 

FX Market

The FX Market had a generally quiet session, as the closing rates remained unchanged D/D across all market segments. At the I&E FX window, trading volumes dropped drastically by c.81% as supply weakened, causing the local banks' bided range to widen by N15.76k compared to yesterday. The volume traded was approximately $40.31m while the market high and low was within N414.76/$1 and N389.00/$1, respectively.


FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

394.67

394.67

Cash Market

472.50

472.50

Transfer Market

485.00

485.00

 

 

Eurobonds

The NIGERIA Corps saw some profit-taking today, as sellers continued to offer most of the tracked papers. The FIDBAN 2022s remained the odd-one-out as demand for that paper remained strong, pushing yields further down by c.31bps. 

 

The NIGERIA Sovereigns closed the trading week with little trading activity recorded. Yields on the sovereign curve weakened by c.6bps on the average, as profit-takers' actions put some pressure on bond yields despite the increasing global oil prices (BRENT increased by 0.16% to close at $55.46pb).

 

 Proshare Nigeria Pvt. Ltd.




Proshare Nigeria Pvt. Ltd.




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Proshare Nigeria Pvt. Ltd.


 Proshare Nigeria Pvt. Ltd.

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