Fixed Income Markets Shrug Off Increased Inflation Figures

Proshare

Tuesday, September 15, 2020 / 9:36 PM / By Zedcrest Capital / Header Image Credit: The Economic Times


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FGN Bonds

The FGN Bonds market opened with a negative reaction to the August 2020 Inflation figures which came out 40bps higher at 13.22%.  The weakness was not sustained however, as demand for bonds at the belly of the curve took advantage of the improved offers there as we noted demand on the 2027s-2030s papers. The long-end of the curve remained flat, with offers on the 2049s and 2050s at mid-9% levels failing to incite any demand interest.

We expect the market to shrug-off the inflation report as liquidity from FGN Bond coupon and OMO maturities payments remain the main driver for demand in the fixed income space in the interim. We expect demand to continue in the interim in the secondary market, as the DMO signalled its intent to keep rates low through its reduced offer at this month's FGN bond auction.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

16.39 27-Jan-22

5.00

3.45

0.00

 

12.75 27-Apr-23

5.65

3.80

0.00

 

14.20 14-Mar-24

5.65

4.00

0.00

 

13.53 23-Mar-25

5.80

4.90

0.00

 

12.50 22-Jan-26

6.80

6.30

0.00

 

16.29 17-Mar-27

7.75

7.40

0.00

 

13.98 23-Feb-28

7.80

7.60

0.00

 

14.55 26-Apr-29

8.55

8.00

(0.05)

 

12.15 18-Jul-34

9.85

9.60

0.00

 

12.40 18-Mar-36

9.90

9.65

0.00

 

16.2499 18-Apr-37

9.90

9.75

0.00

 

14.80 26-Apr-49

10.02

9.90

0.00

 

 

Treasury Bills

Demand continued to outweigh supply in the OMO bills market, as local banks continued to scramble to fill-up their excess liquidity positions. Not much trades were crossed, especially at the long-end of the OMO curve as bids stayed firmly above 3.00% level but offers remained below. Rate consequently closed lower by c.72bps on the average across the benchmark OMO curve.

We expect improved supply in tomorrow's session, as offshore players should look to sell-off old stock in preparation for the anticipated OMO auction much later this week.

 

Primary Market Auction Expectation

NTB  - 10 Sept. 2020

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

2.00

1.00-1.20

1.1000

182 days

8.38

1.35 - 1.50

1.5500

364 days

148.63

2.75-3.00

3.0500

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 10/1/2020

2.50

0.01

(0.50)

NGOMO 11/03/2020

3.00

0.01

0.00

NGOMO 12/01/2020

3.00

0.01

0.00

NGOMO 01/05/2021

3.00

0.01

(1.00)

NGOMO 02/02/2021

3.00

0.01

(1.00)

NGOMO 03/02/21

3.50

0.01

(0.50)

NGOMO 05/11/21

3.50

0.01

(1.50)

NGOMO 06/08/21

4.00

0.01

(1.00)

NGOMO 08/10/21

4.00

0.01

(1.00)

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 10/1/2020

2.50

0.01

0.50

NIGTB 11/12/2020

2.50

0.01

0.50

NIGTB 12/31/2020

2.50

0.01

0.50

NIGTB 01/14/2021

3.00

0.01

0.50

NIGTB 02/11/2021

3.00

0.01

0.50

NIGTB 04/29/2021

3.00

0.01

0.00

NIGTB 05/13/21

3.50

0.01

(0.50)

NIGTB 06/10/21

4.00

0.01

0.00

NIGTB 07/01/21

4.00

0.01

0.00

NIGTB 08/26/21

4.00

0.01

0.00

 

Money Markets

Interbank rates remained relatively stable, despite a 12.33% drop in system liquidity figures. Rates closed by c.58bps on the average, as OBB and OVN rates closed the day at 4.40% and 5.20% respectively.

We expect rates to remain stable at lower single digits ahead of expected OMO maturities of N350bn and FGN Bond coupons of c.N90bn dropping later in the week.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

4.40

5.00

Overnight (O/N)

5.20

5.75


FX Market

The FX markets has a stable session today, with rates across all market segments remaining unchanged.

We expect the rates to remain stable for most the week, as the Naira comfortably trades at current levels.

 

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

386.00

386.00

Cash Market

460.00

460.00

Transfer Market

465.00

465.00

 

Eurobonds

The NIGERIA Sovereigns strengthened in today's session, off the back of an increase in global oil as Hurricane Sally causes disruptions across North America. Bids improved across most of the papers on the sovereign curve, as yields compressed by c.4bps on the average.

The NIGERIA Corporate papers also traded on a positive note, with some improved bids seen on the ACCESS 2021s and UBANL 2022s papers.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd. 


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