MPC Meeting: CBN Maintains Monetary Stance, As Voting Leans Hawkish

Proshare

Wednesday, March 24, 2021 / 8:47 AM / By Zedcrest Capital / Header Image Credit: Channels TV


Proshare Nigeria Pvt. Ltd.


FGN Bonds

The FGN bond market traded on a very calm note, although with a bearish tilt as market participants anticipated the outcome of the MPC meeting that was concluded today. We saw local investors maintain their demand bias for short-duration bonds, with emphasis on the 2028s and 2029s papers, which traded around 10.20% levels, respectively. We also saw little action on the 2045 bonds, with trades executed around 11.65% ahead of supply from the bond auction. Consequently, yields compressed by c.1bps D/D on the average across the benchmark curve.

 

The MPC came out of its two-day meeting, maintaining its benchmark interest (MPR) at 11.50% as well as other monetary policy tools for the third straight meeting. Interestingly at this meeting, a third of the members opted this time for an increase in the MPR, a shift from the unanimous stance at the previous meeting towards a more hawkish monetary policy stance.

 

We expect another weak trading session tomorrow as investors remain focused on the coming bond auction.

 

FGN Bonds Expectation - March 2021

Tenor

Offer (N'bn)

Expected Stop Rate (%)

Previous Stop Rate (%)

Mar-27

50.00

10.10 - 10.35

10.25

Mar-35

50.00

11.25 - 11.50

11.25

Jul-45

50.00

11.75 - 12.00

11.80


Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

7.48

6.27

(0.51)

14.20 14-Mar-24

9.10

7.34

(0.01)

13.53 23-Mar-25

10.00

7.37

0.00

12.50 22-Jan-26

10.47

10.00

0.12

16.29 17-Mar-27

10.54

10.10

(0.01)

13.98 23-Feb-28

10.55

10.15

(0.10)

14.55 26-Apr-29

10.61

10.20

(0.17)

12.15 18-Jul-34

11.65

11.38

0.00

12.50 27-Mar-35

11.76

11.35

0.00

12.40 18-Mar-36

11.75

11.35

0.00

16.2499 18-Apr-37

11.74

11.41

(0.01)

9.80 24-Jul-45

11.96

11.50

0.15

14.80 26-Apr-49

12.00

11.65

0.20

12.98 27-Mar-50

12.00

11.55

0.20



Proshare Nigeria Pvt. Ltd.

 

Treasury Bills

Trading in the secondary market for Treasury Bills stalled again for another consecutive trading session, as local banks remain wary of taking on risk at single-digit levels preferring to wait for better rates at the primary auction (OMO) expected later in the week. Offers across various short-term instruments (NTBs, OMO, and Special Bills) remained unheeded as tight system liquidity and double-digit money market rates continue to negatively impact discount rates.

 

OMO maturities of N43.00bn proved insufficient to kick start demand in the bills space, we expect the market to remain sparsely traded as local banks await the liquidity windfall from expected FAAC inflows.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 05/11/21

13.00

0.01

0.00

NGOMOB 0 06/08/21

13.00

0.01

0.00

NGOMOB 0 08/10/21

13.00

0.02

0.00

NGOMOB 0 09/07/21

13.00

0.02

0.00

NGOMOB 0 10/19/21

12.00

0.02

0.00

NGOMOB 0 11/02/21

12.50

0.03

0.00

NGOMOB 0 12/07/21

12.50

0.03

0.00

NGOMOB 0 01/11/22

12.50

0.03

0.00

NGOMOB 0 02/01/22

13.00

0.03

0.00

NGOMOB 0 03/01/22

13.00

0.03

0.00

 

Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 04/29/21

13.00

0.01

0.00

NIGTB 0 05/13/21

13.00

0.01

0.00

NIGTB 0 06/10/21

13.00

0.01

0.00

NIGTB 0 07/01/21

13.00

0.01

0.00

NIGTB 0 08/26/21

13.00

0.02

0.00

NIGTB 0 09/09/21

12.00

0.02

0.00

NIGTB 0 10/14/21

12.00

0.02

0.00

NIGTB 0 11/11/21

11.00

0.03

0.00

NIGTB 0 01/13/22

11.00

0.03

0.00

NIGTB 0 02/10/22

11.00

0.03

0.00

 


Money Markets

Inflow from OMO maturities caused money market rates to recoil by an average of 288bps as funding pressures reduced and local banks increased funding from the CBN's lending facility windows. OBB and O/N rates closed at 11.50% and 12.00% respectively.

 

For tomorrow, we expect the interbank rates to venture into a single-digit corridor as the funding pressures remain low amongst the market players and FAAC payments are expected to flow later in the week.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

11.50

14.50

Overnight (O/N)

12.00

14.75

 


FX Market

At the IEFX space, we saw an uptick in supply of the greenback, as traded volumes increased by 28.00% D/D (c.$33.11mio traded). The Naira appreciated by N0.33k in that space as most banks remained bid between N393.00 and N412.00 to the dollar.

 

The Naira lost value at the parallel market, with the transfer rates depreciating by 0.71% D/D (c.N3.50k loss) to close at N497.50/$ as demand remains largely unmet. The cash rate also depreciated by 0.10% D/D (c.N0.50k loss) to close at N483.00/$.


FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

409.80

410.13

Cash Market

483.00

482.50

Transfer Market

497.50

494.00

 


Eurobonds

The market continued to react negatively to increasing expectations of supply as the Nigerian government contemplates tapping into the Eurobond market to fund part of its budget, despite earlier indications of the opposite. The NIGERIA Sovereign tickers weakened for a second consecutive session, as yields expanded further by c.2bps D/D on the average across the sovereign curve.

 

The NIGERIA Corps tickers coughed up some of the previous day's gains as investors looked to cycle out of current holdings to prepare for the upcoming Seplat 5-year issue.

 

Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.



Related News

1.      Ahead of Next FGN Bond Auction Scheduled for 24th March 2021

2.     Bond Yields Rise as the Market Size Up the MPC Meeting and Bond Auction Coming This Week

3.     SEPLAT Notifies of Proposed Bond Issue and Conditional Redemption

4.     Sustained Bearish Performance as NT-Bills Average Yield Expands 64bps

5.     HONYFLOUR Notifies of Bond Issuance

6.     DMO Lists N162.56bn 7-Year Sovereign Sukuk on NSE

7.     T-Bill Yields Expand as Funding Pressures Persist, DMO Raises 1-Year Rate at PMA

8.     Invest in FGN Monthly Bond Auction - March 2021

9.     Nigeria's Inflation Rises to 17.33%, Highest In 4 Years, Causing a Somber Trading Session

10.  ARDOVA Notifies of Proposed N60bn Bond Issuance Programme

11.   Bond Yields Push Higher as Unemployment Figures Came Out Weaker for Q4'2020

12.  Average NT-Bills Yields Expand 110bps WoW to 2.7% Amidst Sell-offs Following Tight Funding Levels

 

READ MORE:
Related News
SCROLL TO TOP