Market Outlook on The Special OMO Bills Tepid Market Appetite for Fixed Income Securities

Proshare

Tuesday, December 8, 2020 / 8:26 AM / By Zedcrest Capital / Header Image Credit: Nigerian Banker


Proshare Nigeria Pvt. Ltd.


FGN Bonds

Market appetite for bonds dropped further compared to Friday as most market participant continues to anticipate the special OMO credit as advised by the Apex bank, which is expected to set a new direction in the fixed market as a whole. Trading activities dragged for most of the trading hours as dealers preferred to stay on side-lines observing market movement and reactions in line with the outcome of these CRR OMO credits that is expected to hit the system.

 

The bears were mainly slated at the belly of the curve especially on the 2036s and 2037s papers which was offered around the mid 5% levels while bids stood c.150bps apart for these quoted papers. The 2049s and 2050s papers were offered at 6.90% levels albeit no-bid to match these offers.

 

We expect this uncertainty to persist until the much-anticipated bill is credited into the system, Albeit the market ATM poses a good buy opportunity for local investors who are seeking to invest their loose funds.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

16.39 27-Jan-22

3.65

0.29

2.76

 

12.75 27-Apr-23

3.99

1.18

3.13

 

14.20 14-Mar-24

3.97

1.19

2.90

 

13.53 23-Mar-25

4.04

1.19

2.77

 

12.50 22-Jan-26

5.28

3.50

1.89

 

16.29 17-Mar-27

5.72

3.78

1.94

 

13.98 23-Feb-28

5.88

4.05

1.89

 

14.55 26-Apr-29

5.96

4.15

1.96

 

12.15 18-Jul-34

6.80

5.00

1.80

 

12.50 27-Mar-35

7.10

5.00

2.10

 

12.40 18-Mar-36

7.09

5.00

2.09

 

16.2499 18-Apr-37

7.08

5.00

2.08

 

9.80 24-Jul-45

7.18

5.30

1.88

 

14.80 26-Apr-49

7.50

6.90

0.60

 

12.98 27-Mar-50

7.50

6.90

0.60

 

 

Treasury Bills

The Treasury Bills traded one-way today all bears no bulls although largely concentrated mid-long dated papers. March and June bills were offered at 0.30% levels while Oct-Nov bills were offered at 0.50% levels. At the early hours of trading, we saw few aggressive bids in small volumes at the 1.20% level for the march bills but snoozed off quickly.

We expect the market to stay calm in the interim although supply will mostly increase across the curve.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 01/05/21

0.50

0.15

0.00

NGOMOB 0 02/02/21

0.50

0.20

0.00

NGOMOB 0 03/02/21

0.80

0.20

0.00

NGOMOB 0 05/11/21

0.80

0.30

0.00

NGOMOB 0 06/08/21

0.80

0.30

0.00

NGOMOB 0 08/10/21

0.80

0.35

0.00

NGOMOB 0 09/07/21

1.00

0.50

0.00

NGOMOB 0 10/19/21

1.10

0.50

0.00

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 12/31/20

0.50

0.15

0.00

NIGTB 0 01/14/21

0.50

0.15

0.00

NIGTB 0 02/11/21

0.50

0.20

0.00

NIGTB 0 03/11/21

0.80

0.30

0.00

NIGTB 0 04/29/21

0.80

0.30

0.00

NIGTB 0 05/13/21

0.80

0.30

0.00

NIGTB 0 06/10/21

0.80

0.35

0.00

NIGTB 0 07/01/21

0.80

0.35

0.00

NIGTB 0 08/26/21

1.00

0.35

0.00

NIGTB 0 09/09/21

1.00

0.50

0.00

NIGTB 0 10/14/21

1.10

0.65

0.00

 

Money Markets

Money market rates dropped by c.240bps in today's session compared to Friday's level, supported by the low immediate funding pressure in the market. System liquidity opened the session at N258.07Bn (c.64% lower D/D), while the OBB and OVN rates closed at 1.42% and 1.67% respectively.

 

We expect rates to remain stable in the interim, as there are no major outflows expected to hit the market in the course of the week.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

1.42

3.63

Overnight (O/N)

1.67

4.25

 

FX Market

The IEFX window continues to receive steady flows from the Apex bank although still poorly supplied compared to demand as rates ranged between N395/$1-N396/$1. The Cash/Transfer window also saw slight relief compared to Friday appreciating by an average of N2.5k to close the day at N471/$1 and N487/$1 respectively.

We expect that the continuous intervention from the Apex bank in the IEFX window would most likely induce the appreciation of Naira in the parallel market in the short-term.

FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

395.00

395.00

Cash Market

471.00

475.00

Transfer Market

487.00

488.00

 

Eurobonds

Although the demand for Sub-Saharan papers remains high especially for NIGERIA Sovereigns, we saw less aggressive bids compared to Friday as buying pressure slowed down across the curve. Most of the market juice stayed at the belly and the tail of the curve where yield chasing investors seem to focus most of their attention. Despite the market appetite, we saw yield expanded slightly across the curve at around +9bps

 

The NIGERIA Corporates had a less active session, although we noted few market interests on FBNL 2025s and ETINL 2024s papers as the improved pocket demand on these papers was matched by the supply seen.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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