Gap Between Primary and Secondary Market OMO Rates Widens as CBN Sells N134bn At Auction

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Thursday, April 16, 2020 / 10:30 PM / Zedcrest Capital / Header Image Credit: Clientron

 


Below are highlights of trading activities in the fixed income and forex market on April 16, 2020 

 

FGN Bonds

It was a sluggish session in the Bonds Market, as demand dampened off the back off corporate primary market activities. The mid-end bonds remained the most sought after, with the 2028s maturity leading the charge. Despite a slower market, yields on the benchmark bond still compressed by c.9bps on the average as supply remains inadequate to match demand.

 

At the primary market, the Dangote Cement bond successfully closed at 12.50%, taking out N100bn of demand from local investors. We demand to soften in tomorrow's session, as investors begin to focus on the monthly bond auction coming up next week.



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Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

5.85

5.20

(0.05)

 

16.39 27-Jan-22

6.77

6.09

(0.04)

 

12.75 27-Apr-23

9.82

9.04

(0.01)

 

14.20 14-Mar-24

10.22

8.96

(0.01)

 

13.53 23-Mar-25

11.88

9.63

(0.11)

 

12.50 22-Jan-26

11.99

10.94

0.00

 

16.29 17-Mar-27

11.95

11.71

(0.10)

 

13.98 23-Feb-28

11.97

11.69

(0.26)

 

14.55 26-Apr-29

12.10

11.64

(0.18)

 

12.15 18-Jul-34

12.22

12.10

(0.21)

 

12.40 18-Mar-36

12.47

12.00

0.00

 

16.2499 18-Apr-37

12.35

12.17

(0.16)

 

14.80 26-Apr-49

12.65

12.52

0.00

 

 


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Treasury Bills

The OMO market kicked off on a soft note, as the CBN announced its auction an hour ahead of trading. Secondary market demand remained evident despite this impending supply, especially at the long-end of the curve which saw rates trade comfortably around the lower 10% levels as local banks battle with excess cash positions. Rates closed lower by c.16bps on the average on the benchmark OMO curve.

 

At the OMO auction, the CBN successfully sold a total of N134bn across three tenors on offer to rollover maturities of c.N136bn. The Apex bank dropped its stop rate at the long-end slightly by c.5bps, while resuming sales for the short- and mid-tenor maturities.

 

While the supply from today's OMO auction is expected to close the gap between secondary market rates in tomorrow's session, we do not expect a drastic uptick in rates as system liquidity remains buoyant supporting sustained demand.

 

Primary Market Auction Results

OMO – Apr. 16, 2020

Tenor

Offer (N'bn)

Subscription (N'bn)

Sale (N'bn)

Stop Rate (%)

91 days

5.00

16.00

16.00

11.50

182 days

5.00

18.00

18.00

11.54

364 days

90.00

100.00

100.00

12.75

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOM 5/14/2020

9.00

5.00

(2.25)

NGOM 6/4/2020

11.25

5.00

0.50

NGOM 7/2/2020

11.50

5.00

0.25

NGOM 8/13/2020

10.20

8.00

(1.05)

NGOM 9/3/2020

11.70

9.70

0.45

NGOM 10/1/2020

11.80

9.00

0.30

NGOM 11/03/2020

11.80

9.85

0.30

NGOM 12/01/2020

12.00

9.50

0.00

NGOM 01/05/2021

12.00

10.50

(0.25)

NGOM 02/02/2021

12.00

9.00

0.00

NGOM 03/02/21

12.00

9.00

0.00


Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 2-Jul-20

2.00

0.50

(0.10)

NIGTB 1-Oct-20

3.00

1.00

0.00

NIGTB 12-Nov-20

3.75

1.00

0.10

NIGTB 14-Jan-21

3.85

1.00

0.00

NIGTB 11-Feb-21

4.00

1.00

0.00

                                                                         



Money Markets

Money Market Rates remained stable in today's session, despite an OMO auction, as system liquidity remains buoyant. The CBN sold a total of N134Bn to match maturities of N136bn, effectively leaving liquidity stable to close at c.N574.09bn. OBB and OVN rates closed at 2.00% and 2.67% respectively.

 

Rates are expected to remain stable for the rest of the week, as OMO maturities are expected to hit the system tomorrow.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

2.00

2.00

Overnight (O/N)

2.67

2.42


 

FX Market

The Naira traded on a solemn note in today's trading session, as the I&E FX closing rate posted at 0.10% loss in value to close at N386/$ amidst low traded volumes ($14.21million, down 63% down D/D). The CBN rates remained unchanged again for another consecutive session.

 

The parallel market remained stable, as both cash and transfer rates remained unchanged at N415.00/$ and N432.00/$ respectively.

 

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

 361.00

 361.00

CBN SMIS

 380.69

 380.69

I&E FX Window

386.00

385.63

Cash Market

 414.00

 414.00

Transfer Market

 432.00

 432.00

 

Eurobonds

The NGERIA Sovereigns continued to take a beating amidst low oil prices. Yields expanded further by c.11bps on the average across the benchmark curve as the streets maintain a risk-off posture towards oil-related sovereigns.

 

The FIDBAN 2022s paper continues to enjoy the joy of local investors due to its attractive yields compared with the other NGERIA Corps papers. Demand for the single paper brought its yields down 145bps in today's session, while other tracked paper weakened slightly.

 

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