Yields Climb as DMO Released Q2 2021 Issuance Calendar, Looks to Raise 10% More

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Wednesday, April 7, 2021 / 8:56 AM / By Zedcrest Capital / Header Image Credit: DMO


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FGN Bonds

The FGN bond market resumed from the break to further weakened sentiments as spreads expanded across the benchmark curve. We witnessed sustained selling pressure for the belly of the curve, with bids on the 2027s to 2029s papers were shown above the 11.00% mark. The tail-end of the curve was also pressured with supply which pushed yields on the 2045 to 2050s papers up by c.45bps on the average. Overall, yields expanded by c.20bps on the average across the FGN benchmark curve.

 

The DMO released its quarterly bond issuance calendar for Q2 2021, with more than a few surprises up its sleeve. First off, the DMO increased the amount on offer range by N15Bn/month. Second to note is the DMO's preference to reopen the 2049s at the May 2021 auction, immediately resuming the reissue of the 2045s as its longest tenor.

 

The weak signals from the released bond issuance calendar should further spur weak sentiments in the bond markets, as the institutional investors renew their resolve to stay out of the secondary markets and wait on the increased supply from the DMO for higher yields at the primary market. We expect the selling pressures to persist in the market as a result of this.

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

8.00

6.45

0.50

14.20 14-Mar-24

9.15

7.00

0.15

13.53 23-Mar-25

9.60

8.00

0.10

12.50 22-Jan-26

10.75

10.30

0.10

16.29 17-Mar-27

11.00

10.60

0.10

13.98 23-Feb-28

11.15

10.70

0.15

14.55 26-Apr-29

11.35

10.80

0.20

12.15 18-Jul-34

11.80

11.45

0.10

12.50 27-Mar-35

11.90

11.60

0.05

12.40 18-Mar-36

11.95

11.60

0.10

16.2499 18-Apr-37

12.00

11.65

0.10

9.80 24-Jul-45

12.90

12.30

0.40

14.80 26-Apr-49

12.60

12.00

0.45

12.98 27-Mar-50

12.60

12.05

0.45

 

Treasury Bills

The Treasury bills market also resumed on a negative note, as tight interbank system liquidity continued to put upward pressure on discount rates. Offers of long-dated NTBs flooded the market, with Jan. 2022 and Feb. 2022 papers offered at 6.50% and 7.00% levels respectively, while the 31Mar2022 was offered at 7.40% for most of the session.

 

With OMO maturities of N34Bn failing to spur a jolt in demand for bills from local banks, we expect these rates to continue to inch higher for most of the week.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 05/11/21

10.00

0.05

(3.00)

NGOMOB 0 06/08/21

10.00

0.05

(3.00)

NGOMOB 0 08/10/21

10.00

0.10

(3.00)

NGOMOB 0 09/07/21

9.00

0.10

(4.00)

NGOMOB 0 10/19/21

10.00

0.10

(3.00)

NGOMOB 0 11/02/21

10.00

0.20

(3.00)

NGOMOB 0 12/07/21

11.00

0.20

(2.00)

NGOMOB 0 01/11/22

11.00

0.20

(2.00)

NGOMOB 0 02/01/22

12.00

0.20

(1.00)

NGOMOB 0 03/01/22

12.00

0.20

(1.00)

 


Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 04/29/21

7.00

0.05

(6.00)

NIGTB 0 05/13/21

9.00

0.05

(4.00)

NIGTB 0 06/10/21

8.00

0.05

(5.00)

NIGTB 0 07/01/21

9.00

0.05

(4.00)

NIGTB 0 08/26/21

9.00

0.10

(4.00)

NIGTB 0 09/09/21

9.00

0.10

(3.00)

NIGTB 0 10/14/21

9.00

0.10

(3.00)

NIGTB 0 11/11/21

10.00

0.20

(3.00)

NIGTB 0 01/13/22

10.00

0.20

(3.00)

NIGTB 0 02/10/22

11.00

0.20

(2.00)

 


Money Markets

Rates in the money market dipped by c.1763bps following inflows from OMO maturities of N34Bn and banks accessing the CBN's lending facilities with no FX funding due this week. The OBB and OVN rates consequently ended the session at 13.50% and 13.75%, with system liquidity now estimated at c.N45bn positive.

 

We expect rates to trend higher in tomorrow's session, with the possibility of another liquidity squeeze from a possible OMO auction expected to push local banks to focus on longer-dated funding options.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

13.50

30.00

Overnight (O/N)

13.75

32.50

 


FX Market

Supply in the I&E FX window improved from export proceeds as traded volumes improved by 15% d/d (c.$40.80mio traded). Participants were bided between N394.00$ and N419.30/$ causing the closing rate to depreciate by 0.29% d/d to close at N410.50/$.

 

At the parallel market, the Naira bounced back from the previous week's low to close the first session on a positive note. Cash rates N2.50k while the transfer rate gained N2.10k to close at N481.50/$ and N495.90/$ respectively.


FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

410.50

409.30

Cash Market

481.50

484.00

Transfer Market

495.90

498.00

 


Eurobonds

The NIGERIA Sovereigns, along with most of the SSA Space, opened trading unchanged as the U.S. economic and Covid vaccination date impressed the market as well as stability seen in global oil prices. Yields compressed across the covering curve by c.7bps as demand filtered through as the trading wore on.

 

The NIGERIA Corporates also had an active trading session, with demand filtering for most of the short-dated tracked papers, while the long-dated papers (ECOTRA 2026s and SEPLLN 2026s) saw some selling pressures on the day.


Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.



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