Funding Pressures Persist as Banks camp at the Standing Lending Facility (SLF) Window

Proshare

Wednesday, August 21, 2019 / 08:35 AM / By Zedcrest Capital 

 

Below are highlights of trading activities in the fixed income and forex market on August 20, 2019

 

Bonds

The FGN Bond market remains muted due to the bearish sentiment and ahead of the bond auction on Wednesday, with little flows been passed during todays trade session. Yields closed marginally lower by c.1bps as bids improved across the mid- to long-end and weakened at the short-end of the FGN Bond curve. 

Given the recent surge in sovereign yields, we expect the auction stop rates to clear above their previous auction levels at the FGN bond auction scheduled for tomorrow, where the DMO intends to offer a total of N145bn bonds across the 5, 10 and 30yr tenors.

 

FGN Bond Auction Expectations

Tenor

Offer (N'bn)

Expected Stop Rate (%)

Apr-23

40.00

14.05 – 14.25

Apr-29

50.00

14.15 – 14.50

Apr-49

55.00

14.45 – 14.60

Source: Zedcrest Research

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.47

13.92

0.00

16.39 27-Jan-22

14.61

14.15

0.00

12.75 27-Apr-23

14.42

14.16

0.04

14.20 14-Mar-24

14.18

13.77

0.03

13.53 23-Mar-25

14.56

13.90

0.24

12.50 22-Jan-26

14.37

14.11

(0.03)

16.29 17-Mar-27

14.30

14.15

(0.17)

13.98 23-Feb-28

14.50

14.29

(0.07)

12.15 18-Jul-34

14.50

14.18

(0.12)

12.40 18-Mar-36

14.67

14.31

(0.01)

16.2499 18-Apr-37

14.64

14.30

0.00

14.80 26-Apr-49

14.64

14.50

(0.08)


Source: Zedcrest Dealing Desk

 

Treasury Bills

The T-bills market saw some respite in sell-offs from previous trading sessions, with some demand noticed across some select maturities. Yields consequently closed c.9bps on the average across the NTB curve, this despite interbank funding pressures. 

We expect yields to remain for the rest of the week, with both wholesale FX and FGN Bond auctions expected to further strain liquidity levels.

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

12-Sep-19

15.00

13.00

(0.50)

3-Oct-19

15.00

13.50

0.00

14-Nov-19

15.00

12.00

0.00

5-Dec-19

15.00

13.50

0.00

2-Jan-20

14.95

13.75

(0.05)

6-Feb-20

14.90

13.75

0.00

19-Mar-20

14.75

12.75

(0.15)

2-Apr-20

14.50

12.80

(0.25)

14-May-20

14.25

12.25

0.00

04-Jun-20

14.00

12.25

0.00

02-Jul-20

14.00

12.25

0.00

Source: Zedcrest Dealing Desk

 

Money Market

Despite system liquidity figures opening short at c.N247bn negative, money market rates retreated lower as participants capped interbank borrowing to SLF rates. The OBB and OVN rates consequently ended the session at 18.57% and 20.36% respectively.

We expect rates to remain stable for the rest of the week, as banks provide funding for the CBNs weekly wholesale FX auction as well as the DMO’s monthly Bond auction.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

18.57

28.29

Overnight (O/N)

20.36

30.29

Source: FMDQ, Zedcrest

 

 

FX Market

At the interbank, the Naira/USD spot and SMIS rates remained stable at N360.95/$ and N357.96/$. The Naira depreciated at the I&E window, losing 36kobo to close at N363.68/$. The cash rate depreciated by 30kobo to close at N358.80/$ while transfer rate remained stable as N363.00/$ at the parallel market.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

357.96

357.96

I&E FX Window

363.68

363.32

Cash Market

358.80

358.50

Transfer Market

363.00

363.00

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The NGERIA Sovereigns reversed some gains from the previous trading session today, with yields trending higher by c.7bps on the day. The most loses were recorded at extreme ends of the curve, as both the 21s and 47s lost 10pct and 7pct respectively. 

In the NGERIA corps, we saw mixed trading interests as the ACCESS 21s and UBANL 22s weakened by 5bps and 14bps respectively, whilst the FIDBAN 22s gained 13bps. Yields remained relatively stable, except for some weakness in the ZENITH 22s.

 

Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.


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3.      CBN Succumbs to Market Pressures, Raises OMO Auction Rate

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

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