Sub-Saharan Eurobonds Rallied Following Further Oil Production Cuts By Saudi Arabia

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Sunday, May 10, 2020 / 8:10 AM / By Zedcrest Capital / Header Image Credit: ilearnlot

 

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FGN Bonds

Yields in the Bond market raced up opening the week following insights from the Director-General of the DMO over the weekend about the office's revised borrowing plans amid the COVID-19 pandemic. Market participants positioned for the expected supply of bonds as the DMO's figure for local borrowing for 2020 (estimated at N2Trn) was higher than initially expected. Bids remained shy across the benchmark curve for most of the session, except for 2027s and 2049s which remained well bided by locals. Average yields expanded by c.30bps across the benchmark curve.

 

Market participants will look to price-in the expected supply of bonds and we expect the market to remain touchy in the interim, pending further guidance from the DMO in the form of a revised borrowing calendar for the quarter.


                       Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

8.10

5.00

0.85

 

16.39 27-Jan-22

9.24

5.43

0.58

 

12.75 27-Apr-23

10.77

8.46

0.78

 

14.20 14-Mar-24

10.62

8.45

0.59

 

13.53 23-Mar-25

9.95

8.50

0.12

 

12.50 22-Jan-26

10.70

10.00

0.12

 

16.29 17-Mar-27

11.26

10.83

(0.06)

 

13.98 23-Feb-28

11.32

10.70

0.09

 

14.55 26-Apr-29

11.96

10.94

0.34

 

12.15 18-Jul-34

11.99

11.22

0.29

 

12.40 18-Mar-36

11.97

11.33

0.14

 

16.2499 18-Apr-37

11.94

11.25

0.11

 

14.80 26-Apr-49

12.70

12.55

(0.01)

 

 

Treasury Bills

The Treasury Bills Market started the week on a more positive note, as we noted improved demand on the short-dated OMO maturities mostly from off-shore portfolio investors waiting on the dollar supply promised by the CBN. Offers remained scanty on the day, causing spreads to expand as liquidity on the papers remained poor.

 

The demand for retail-size on NTBs remained in today's session, pushing rates down by c.66bps on the average across the benchmark NTB curve.

 

We expect the market to remain scantily traded as participants look toward supply from the CBN as OMO maturities of c.N297bn hit the system later in the week.


                                  Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOM 5/14/2020

11.00

5.00

1.25

NGOM 6/4/2020

10.00

5.00

0.00

NGOM 7/2/2020

10.00

5.00

1.00

NGOM 8/13/2020

10.00

6.50

(0.50)

NGOM 9/3/2020

11.25

7.00

0.75

NGOM 10/1/2020

11.50

7.50

1.00

NGOM 11/03/2020

11.50

4.00

1.00

NGOM 12/01/2020

11.75

8.00

1.25

NGOM 01/05/2021

11.00

10.00

0.00

NGOM 02/02/2021

12.00

9.00

1.00

NGOM 03/02/2021

12.00

9.00

1.00

 

 

                             Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 2-Jul-20

2.50

0.50

(1.50)

NIGTB 1-Oct-20

3.00

1.00

(1.00)

NIGTB 12-Nov-20

3.50

1.00

(0.50)

NIGTB 14-Jan-21

3.70

1.00

(0.30)

NIGTB 11-Feb-21

4.00

1.00

0.00

 


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Money Markets

Money Market rates started the week slightly higher, inching close to 10.00% as system liquidity remained relatively tight. The OBB and OVN rates closed the day lower at 8.50% and 9.63%, as system liquidity is estimated to have closed at c.N115bn positive.

 

We expect rates to elevate for most of the week amidst tight liquidity, with OMO maturities c.N297bn expected later in the week.


                      Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

8.50

7.42

Overnight (O/N)

9.63

8.33

 


FX Market

The Naira remained fairly stable to open the week. I&E FX window gained N0.3k to close at N386.94/$, with scarce volumes traded (c.$9.98m only), while the CBN spot rate and SMIS rates remained stagnant.


The parallel market also had a quiet day, as supply remains tight and the market lays in wait for the CBN to make its move in regards to the supply of the greenback. The cash rate gained N1 to close at N444.00/$ while the transfer rate remained unchanged at N460.00/$.


                             FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

361.00

361.00

CBN SMIS

380.69

380.69

I&E FX Window

386.94

387.25

Cash Market

444.00

445.00

Transfer Market

460.00

460.00

 

Eurobonds

The NGERIA Sovereign tickers, along with their Sub-Saharan energy-linked counterparties, rallied in today's session following the announcement by the kingdom of Saudi Arabia of its decision to implement additional production cuts of one million barrels per day. Yields compressed by c.81bps on the average across the sovereign curve, as the demand for the sovereign papers remains strong for the second week running.

 

Similarly, the NGERIA Corps tickers also posted gains, as we saw demand on almost all tracked papers with the SEPLLN 2023s the only exception. We expect this rally to sustain in the interim as the streets continue to see the news out of Nigeria as positive.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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