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FGN Bond Yields Tick Higher, As Offshore Investors Resume Profit Taking

Bonds & Fixed Income	990 VIEWS
Bonds & Fixed Income
990 VIEWS

Tuesday, August 06, 2019 / 07:00AM / By Zedcrest Capital

Below were the highlights of trading activities in the fixed income and forex market on August 05, 2019

Bonds

Yields in the FGN Bond Market resumed an uptrend following selloff by some offshore clients on the mid to long end of the curve. Yields were consequently higher by c.12bps, with the most selling interests observed around the 10-year bucket.

We expect bond yields to remain slightly pressured, as offshore investors are expected to remain risk off, given the decline in oil prices (now below $60pb) and escalating US-China trade tensions.

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
14.50 15-Jul-21	12.96	12.75	(0.03)
16.39 27-Jan-22	13.12	12.18	0.04
12.75 27-Apr-23	13.43	12.89	0.05
14.20 14-Mar-24	13.65	13.01	0.21
13.53 23-Mar-25	13.65	12.79	0.16
12.50 22-Jan-26	13.79	13.61	0.12
16.29 17-Mar-27	13.86	13.65	0.15
13.98 23-Feb-28	13.98	13.67	0.28
12.15 18-Jul-34	14.02	13.88	0.04
12.40 18-Mar-36	14.02	13.84	0.13
16.2499 18-Apr-37	13.95	13.81	0.12
14.80 26-Apr-49	14.18	14.05	0.14

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market was slightly bullish, as the buoyant system liquidity levels in the money market spurred some buying interests on the short end of the curve. Demand interests were however subdued on the mid to long end of the curve, with most bids unchanged from the c.11.00% mark.

We expect short term yields to be remain supported by the relatively buoyant system liquidity, whilst interests on the mid to long end are expected to remain scanty as market players anticipate a possible renewed OMO issuance by the CBN.

Benchmark Treasury Bills
Description	Bid (%)	Offer (%)	Day Change (%)
12-Sep-19	10.50	9.50	(0.40)
3-Oct-19	10.55	9.50	(0.40)
14-Nov-19	10.40	9.50	(0.40)
5-Dec-19	10.85	10.65	(0.15)
2-Jan-20	11.05	10.70	0.05
6-Feb-20	11.10	10.75	0.15
19-Mar-20	11.00	10.60	0.00
2-Apr-20	11.10	10.85	0.10
14-May-20	11.05	10.70	0.05
04-Jun-20	11.10	10.60	0.10
02-Jul-20	10.95	10.60	(0.05)

Source: Zedcrest Dealing Desk

Money Market

Rates in the money market remained relatively stable, as system liquidity remained at an estimated c.N220bn positive, despite outflows for FX auction sales by the CBN. The OBB and OVN rates consequently ended the session at 5.43% and 6.00% respectively.

We expect rates to trend slightly lower tomorrow, as there are no significant outflows anticipated.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	5.43	5.64
Overnight (O/N)	6.00	6.43

Source: FMDQ, Zedcrest

FX Market

At the interbank, the Naira/USD rate inched higher by 5k to N306.90/$ at the spot market, while the SMIS rate remained unchanged at N357.68/$. The NAFEX rate at the I&E window fell by 36k to close at N362.21/$, whilst volume traded declined by c.58% to $124m. At the parallel market, the cash and transfer rates remained stable at N357.50/$ and N362.00/$ respectively.

FX Market
	Current (N/$)	Previous ( N/$)
CBN Spot	306.90	306.85
CBN SMIS	357.68	357.68
I&E FX Window	362.21	362.57
Cash Market	357.50	357.50
Transfer Market	362.00	362.00

Source: CBN, FMDQ, REXEL BDC

Eurobonds

The NGERIA Sovereigns recorded its highest decline in over three months, as the Chinese devaluation of the Yuan and ban on US crop imports further escalated its trade dispute with the US. Prices were down by as much as 2pct on most of the long tenured bonds, whilst yields rose by c.25bps on the day.

We also witnessed improved offers in the NGERIA Corps, with better sellers seen mostly on the ETINL 24s.

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