Treasury Bills Market Turns Bearish as the NTB vs OMO TBills Stalemate Lingers

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Thursday, November 07, 2019  / 06:00 AM / By Zedcrest Capital / Header Image Credit: Sun Nigeria

 

The Treasury bills market saw a continuous bearish run as profit-takers triggered sell-offs for short and mid-dated maturities in anticipation of higher rates at tomorrow's OMO auction. Consequently, rates increased by an average of c0.50bps especially on December 2019 and March 2020 bills. Yield hungry local investors continue to search for NTBs particularly at the long end of the curve, depressing rates to c.10.20% on the 353days NTB paper.

 

Below are highlights of trading activities in the Fixed Income & Forex Market on November 06, 2019

 

FGN Bonds

Yields in the bond market declined further in today's session, compressing by c.23bps on the average d/d as we saw more appetite for the short and mid-dated bonds. This came as more Local Pension Funds and Asset Managers sought to re-invest expected OMO maturities and other excess funds in light of the illiquidity of the NTBs. The 2037 bonds compressed the most in yield terms (-46bps) as Long term investors seek bonds with high coupon pay-out.

 

We expect this bullish trend to persist in the near term as we see participants frozen out from the OMO market buy up available bonds at current levels.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

12.60

12.01

(0.40)

16.39 27-Jan-22

12.64

12.14

(0.08)

12.75 27-Apr-23

12.60

12.29

(0.38)

14.20 14-Mar-24

12.36

12.17

(0.30)

13.53 23-Mar-25

12.58

11.97

(0.22)

12.50 22-Jan-26

12.99

12.75

(0.15)

16.29 17-Mar-27

13.44

12.85

(0.06)

13.98 23-Feb-28

13.24

13.01

(0.32)

12.15 18-Jul-34

13.66

13.28

(0.13)

12.40 18-Mar-36

13.66

13.41

(0.14)

16.2499 18-Apr-37

13.34

13.02

(0.46)

14.80 26-Apr-49

13.90

13.81

(0.09)


Source: Zedcrest Dealing Desk

 

Treasury Bills

The Treasury bills market was bearish as profit-takers triggered sell-offs for short and mid-dated maturities in anticipation of higher rates at tomorrow's OMO auction.

 

We expect to see decent demand at tomorrow's OMO auction with Foreign Investors pouring in at these current yield levels as the NTB vs OMO Bills dichotomy lingers.

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Nov-19

14.00

12.75

1.97

5-Dec-19

12.50

11.55

0.50

2-Jan-20

12.50

11.00

0.50

6-Feb-20

12.55

11.00

0.05

19-Mar-20

12.25

10.00

0.10

2-Apr-20

12.60

12.20

0.35

14-May-20

12.25

11.75

0.25

4-Jun-20

12.75

11.30

0.25

2-Jul-20

12.00

10.60

(0.50)

13-Aug-20

12.90

12.30

0.05

3-Sep-20

12.85

12.55

(0.05)

1-Oct-20

12.75

11.25

0.25

 

Source: Zedcrest Dealing Desk

 

Money Market

The OBB and OVN rates remained at single digits inching up slightly from yesterday's closing as there were no significant funding activities by commercial banks today. Market liquidity is estimated at c.N226.86bn positive as at close of business today.

 

Interbank rates are expected to remain low due to OMO maturities of c.N366Bn and Retail FX refunds of about N200bn hitting the system tomorrow.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

4.50

3.57

Overnight (O/N)

5.50

4.14

Source: FMDQ, Zedcrest 

 

FX Market

The Spot, SMIS and parallel market rates remained flat at the FX interbank market. However the I&E FX window rate appreciated by 24k to close at N362.66$ as liquidity improved today.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

358.51

358.51

I&E FX Window

362.66

362.90

Cash Market

358.00

358.00

Transfer Market

362.50

362.50

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The NGERIA Sovereigns remained bearish across all maturities despite the recent increase in oil prices which is usually positive for oil producing Sovereign papers. Yields expanded further by an average c6bps across the NGERIA curve.

 

The NIGERIA Corps saw flurry of sellers across most tracked corp tickers. The ACCESS 2021, FIDBAN 2022 and ETINL 2024 took the most hit in today's trading session with yields expanding by +26bps, +84bps and +12bps respectively.

 

Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.


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