Interbank System Awash With Liquidity As Apex Bank Holds Back On OMO Issuance

Monday, July 27, 2020 / 10:20 PM / By Zedcrest Capital / Header Image Credit: Business Day

FGN Bonds

The FGN bonds space opened the week on a very hushed tone as yield continued to drop across the benchmark curve. With the bulls still in the market, one would have expected exciting actions, however, we saw them scramble for bonds at a very slow pace while hoping for more profit-taking actions from the bears which might aggress slight uptick in yield.

Few of the market actions were on the 2026s and 2035s bond with trades settling around 5.45% and 8.90% on both bonds respectively. The 2049s and 2050s on the other were largely quoted at 9.75%/9.67% for the most of the trading session albeit few trades consummated at those levels. Subsequently, the average yield on the benchmark curve compressed by c.4bps compared to Friday's closing.

For tomorrow, we expect the market to continue to trade at this pace although most of the actions would most likely be skewed towards the longer-dated papers, with exception to the shortest-dated auction paper (2026 maturity).

Treasury Bills

At the OMO space, it was a dull day for the bulls as we saw market offers dried up due to the non-issuance of OMO by the APEX bank despite the robust system liquidity available to gulp large bill sizes. The trading session opened the day one-way all bids and no offer across the benchmark curve, however, by mid-day, we saw slight actions on December and January bills albeit in low volumes with trades settling at 3% mid. At the long-end, we saw most of the market bids for May/June bills at 4.80% with no offer to match for a trade. Consequently, yields compressed by an average of c.9bps on the benchmark curve.

For tomorrow, rates will most likely drop further, and offers remain scarce as the bulls continue to scramble to invest in the few bills available to buy.

Money Markets

The robust interbank system liquidity of +c.N604.45BN continues to tapper down rates with no major funding need to drag rates upward. OBB and OVN rates lost approx. 22% compared to Friday's levels closing the day at 1.13% and 1.88% respectively.

With no significant funding pressures and reduced probability of an OMO auction, we expect the market rate to remain around this level at the interbank trading session tomorrow.

FX Market

The I&E FX window remained less active as the market volumes continue to dwindle while participants stayed bided between N385.00/$ and N389.00/$, causing the closing rate to depreciate by 0.06% from Fridays' closing.

At the cash and transfer window, FX pressure continues to mount as the shortage of supply took a major toll in that space with Naira depreciating by an average of N1.5k for both markets closing the day at N473/$ and N474/$ respectively.

Eurobonds

The NGERIA Sovereign tickers opened the week better offered, with less aggressive bids seen across the curve, especially for the mid and longer-dated papers. By and large, yield expanded by an average of c.7bps across the curve. At the SSA space, Angola's bond continued to gain positive vibes following the announcement by Finance minister on their government intentions to participate in the G20's debt service suspension Initiative. Although we saw no immediate reactions in the Angola bonds, offer prices reprised higher by the close of the business especially on the 25s and 28s papers.

At NGERIA Corps tickers had a mixed session, with a few of the tracked papers moving in opposite directions based on the market interest. Yields on the Zenith 22s and SEPPLN 23s headed south to lead the pack compressing by -11bps and -10bps respectively while the ACCESS 21s headed north expanding by a whooping +59bps.

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