Local Markets Resume from The Holidays with A Whimper, Eurobonds Risk-Off Ahead of US FED Meeting

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Wednesday, June 16, 2021 / 8:47 AM / By Zedcrest Capital / Header Image Credit: MIG


Proshare Nigeria Pvt. Ltd.


FGN Bonds

The trading week resumed on a mute note with some persistent demand seen at the tail-end of the FGN benchmark curve. The session opened with the 35s changing hands at 13.80% levels, while the 2036s which remained offered at 13.65% for most of the session saw no interest from institutional investors. The short-squeeze on the 2045s paper persisted for another consecutive session as the paper remained offered at 15bps lower than its peers at the tail-end of the curve (2049s and 2050s). Consequently, yields compressed slightly by c.2bps D/D on the average across the benchmark curve.

 

Inflation figures for the month of May 2021 were released towards the close of the trading session, with headline inflation printing at 17.93%, a 19bps drop from the previous month's figure, and another consecutive month of a slowdown in the rate of increase of prices YoY. Core inflation continued to accelerate at a fast pace, coming out at 13.17% YoY (43bps higher than Apr. 2021), while Food inflation declined by 44bps clocking in at 22.28%.

 

With inflation printing lower than estimates for a second consecutive month, we expect a short-term downward movement in yields as the market reacts. With the monthly auction still a week away, we expect the market to maintain its current slow pace of activity with a sustained bullish bias.

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

12.00

11.50

0.00

14.20 14-Mar-24

12.50

11.60

0.00

13.53 23-Mar-25

12.70

12.00

0.00

12.50 22-Jan-26

12.80

12.50

0.00

16.29 17-Mar-27

12.90

12.80

0.00

13.98 23-Feb-28

12.95

12.80

0.00

14.55 26-Apr-29

13.00

12.80

0.00

12.15 18-Jul-34

13.70

13.50

(0.10)

12.50 27-Mar-35

13.85

13.60

(0.05)

12.40 18-Mar-36

13.85

13.60

(0.10)

16.2499 18-Apr-37

13.85

13.60

0.00

9.80 24-Jul-45

13.90

13.65

0.00

14.80 26-Apr-49

13.95

13.75

0.00

12.98 27-Mar-50

13.95

13.75

0.00

 


Treasury Bills

The T-bills market opened the week also on a quiet note, with offers seen across the OMO and NTB curves shrugged off by investors ahead of the second NTB Primary Market Auction scheduled for this month. The 09Jun2022 NTB paper remained at a stalemate, as the paper remained quoted 9.30/20 for most of the session with neither side giving way. The Special treasury bills 30th Aug 2021 maturity also saw some interest during the session, quoted with a widespread of 9.30/00 and not many trades passing through.

 

With another primary auction scheduled for tomorrow, we expect another quiet session in the secondary market as investors look to see where the auction rates print at. With the relatively small volumes on offer across the 3 tenors, we expect the stop rate for the 1-year paper to maintain the trend from the last two auctions and dip lower further with the 91- and 182- days expected to remain unchanged.  

 

Primary Market Auction Expectation (NTB) - June 16, 2021

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

2.520

2.45 - 2.55

2.5000

182 days

1.700

3.45 - 3.55

3.5000

364 days

10.610

9.50 - 9.60

9.6400

 

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 08/10/21

11.00

6.00

0.00

NGOMOB 0 09/07/21

11.00

7.00

0.00

NGOMOB 0 10/19/21

11.00

8.00

0.00

NGOMOB 0 11/02/21

11.00

8.00

0.00

NGOMOB 0 12/07/21

13.00

8.00

0.00

NGOMOB 0 01/11/22

13.00

8.50

0.00

NGOMOB 0 02/01/22

13.00

8.50

0.00

NGOMOB 0 03/01/22

13.00

8.50

0.00

 


Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 05/13/21

10.00

2.00

0.00

NIGTB 0 06/10/21

10.00

2.00

0.00

NIGTB 0 07/01/21

11.00

3.00

0.00

NIGTB 0 08/26/21

11.00

3.00

0.00

NIGTB 0 09/09/21

9.00

3.50

0.00

NIGTB 0 10/14/21

11.00

4.00

0.00

NIGTB 0 11/11/21

13.00

7.00

0.00

NIGTB 0 01/13/22

13.00

6.00

0.00

NIGTB 0 02/10/22

13.00

7.50

0.00

NIGTB 0 03/01/22

13.00

7.50

0.00

 


Money Markets

Money market rates resumed the week firmly at double-digit levels as local banks remained pressured for funding amidst tight liquidity levels despite OMO maturities of N46Bn.

 

Open Buy-Back (OBB) and overnight (O/N) rates closed the session at 15.00% and 15.17% respectively.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

15.00

22.33

Overnight (O/N)

15.17

22.93

 


FX Market

At the IEFX space, we saw an 86% uptick D/D in the supply of the greenback, as traded volumes increased to c.$172mio traded. The Naira remained relatively stable, closing the session 0.23% weaker at N411.75/$, with bids showing in a tighter range between N400.00 and N420.97 to the dollar.

 

The Naira also remained relatively stable at the parallel market, with both cash and transfer rates closing unchanged at N505.50/$ mark and N512.00/$ respectively.


FX Market

Current (N/$)

Previous (N/$)

CBN SMIS

380.69

380.69

I&E FX Window

411.75

410.80

Cash Market

500.50

500.50

Transfer Market

512.00

512.00


 

Eurobonds:

The Sub-Saharan African Eurobond space opened the trading session with a risk-off sentiment, ahead of tomorrow's U.S. Fed meeting as well as news of primary issuance supply from Kenya, debt restructuring from Ethiopia. Selling pressure was evident across the board, with the Kenya and Ghana papers the worst hit. The NIGERIA Sovereigns also sold off for most of the session, with offers seen across the sovereign curve despite strong crude oil prices (crossing above the $74/bl mark). Yields closed the session c.5bps higher on the average across the sovereign curve.  

 

On the other hand, the Nigeria Corporates continued to provide a haven for investors, as demand remained persisted across most of the tracked papers. Demand on the ETINL 2031s paper, with the paper changing hands at around the 8.40% mark.


Proshare Nigeria Pvt. Ltd.





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