Nigerian Eurobonds Surge on Trump-Xi’s Planned Meeting at G-20 Summit

Proshare

Tuesday, June 18, 2019    /  07:00PM  /  Zedcrest Capital

 

The NGERIA Sovereigns saw a late positive run in the trading session following tweets from the US president signaling a possible end to trade tensions with China at the forthcoming G-20 summit. The sovereign papers posted their biggest gains in recent times, adding to advances triggered by expectations for further monetary easing sparked by a dovish tone from European Central Bank President Mario  Draghi.

 

Below are highlights from activities in the fixed income and forex market today.

 

Bonds

Bullish sentiments returned to the FGN Bonds Market, as investors cherry-picked yields across the mid-end of the benchmark bond curve, most notably the 2027 & 2028 maturities. Consequently, yields compressed by c.7bps on the average across the benchmark bond curve. 

The DMO released the offer circular for this month’s FGN Bond auction today. Whilst maintaining the overall offer amount, the DMO has shifted its attention to the 10-year bond by increasing the amount on offer to N40bn. 

We expect the positive sentiments to remain in the near term, as optimism for rate cuts by global central banks as well as a resolution to global trade tensions support the carry trade environment for foreign portfolio investors.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.77

14.25

0.00

16.39 27-Jan-22

14.58

14.20

(0.01)

12.75 27-Apr-23

14.63

14.32

0.00

14.20 14-Mar-24

14.48

14.15

0.00

13.53 23-Mar-25

14.50

14.40

(0.20)

12.50 22-Jan-26

14.67

14.25

(0.08)

16.29 17-Mar-27

14.50

14.42

(0.22)

13.98 23-Feb-28

14.61

14.56

(0.08)

12.15 18-Jul-34

14.65

14.56

(0.06)

12.40 18-Mar-36

14.65

14.48

0.03

16.2499 18-Apr-37

14.65

14.48

(0.11)


Source: Zedcrest Dealing Desk

 

Treasury Bills

We witnessed sustained demand for short- to mid-dated maturities in the Treasury Bills market during the day’s session, most notably on the December and February maturities. Yields across the Benchmark NTB curve compressed further by c.4bps on the average.

 

As system liquidity holds at healthy levels, barring any OMO auction, we expect the market to remain bullish in the near term. We see rates at the primary auctions closing lower than the previous auction, a reflection of the low offer amounts as well as current market levels.

 

NTB Auction Expectation – June 19, 2019

Tenor

Offer (N'bn)

Expected Rate (%)

91 days

3.00

9.50 – 10.00

182 days

4.00

11.55 - 11.70

364 days

10.61

11.85 - 12.15


Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

18-Jul-19

10.00

5.00

0.00

1-Aug-19

11.50

5.00

(0.50)

12-Sep-19

12.00

10.00

(0.10)

3-Oct-19

11.70

11.50

(0.10)

14-Nov-19

12.15

11.40

0.00

5-Dec-19

12.20

11.50

0.00

2-Jan-20

12.25

11.95

0.20

6-Feb-20

12.25

12.10

0.00

19-Mar-20

12.25

12.05

0.00

2-Apr-20

12.25

12.05

0.00

14-May-20

12.30

12.00

0.00

04-Jun-20

12.30

12.00

0.00

Source: Zedcrest Dealing Desk

 

Money Market

OBB and OVN rates closed the session lower at 7.21% and 7.71% respectively. Updated financial market figures show system liquidity estimated to close the day at c.N202bn positive.

 

We expect rates to keep steady in light of reduced funding pressures for market participants, barring an OMO auction by the CBN.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

7.21

8.86

Overnight (O/N)

7.71

9.43

Source: FMDQ, Zedcrest Research

 

FX Market

At the interbank, the Naira/USD rate remained stable to close at N306.95/$ (spot) and N356.92/$ (SMIS), with no change either at the I&E window which closed at N360.50/$.

The Naira also held steady at the parallel market, as both cash and transfer rates closed unchanged at N360.00/$ and N362.50/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

356.92

356.92

I&E FX Window

360.49

360.50

Cash Market

360.00

360.00

Transfer Market

362.50

362.50

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

Yields compressed by c.18bps on the average across the sovereign curve, with gains across the curve. Positive sentiments also spread to some of the NGERIA Corps tickers, as investor demand remained most notably on the ETINL 2024 paper which gained +18bps on the day.

 

Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.

 

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 Proshare Nigeria Pvt. Ltd.

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