Yields Continue To Drop As the Market Shrugs Off Increase Supply by The DMO August Auction

Proshare

Tuesday, August 11, 2020 / 8:40 PM / By Zedcrest Capital / Header Image Credit: Brookings


Proshare Nigeria Pvt. Ltd.


FGN Bonds

The FGN Bonds market opened the day with wide spreads as market participants reacted negatively initially to the released April FGN Bond circular, which showed the DMO increasing the offered amount by N20bn across the offered tenors. Despite the weak open, demand from local investors continued to filter in and pressure yields on the 'auction bonds'. The 2035s and 2050s papers remained the toast of investors, as yields on both maturities ultimately closed the trade session 10bps. Bids also improved across some of the benchmark papers, pushing average yields across the curve lower for another consecutive session by c.12bps.

We expect the demand to persist in the interim and leading up to the monthly FGN bond auction, as locals welcome the improved auction offer amounts to match demand from maturing OMO maturities and bond coupon payments expected later this month.

 

FGN Bond Auction Calendar - August 2020

Tenor

August Offer (N'bn)

July Offer (N'bn)

Previous Stop Rate (%)

JAN 2026

25.00

25.00

6.00

MAR 2035

40.00

35.00

9.50

JUL 2045

45.00

35.00

9.80

APR 2050

40.00

35.00

9.95

Total

150.00

130.00

Increase

20.00

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

16.39 27-Jan-22

5.00

3.00

0.00

 

12.75 27-Apr-23

6.50

5.10

(0.55)

 

14.20 14-Mar-24

7.10

4.50

0.00

 

13.53 23-Mar-25

7.50

5.15

0.00

 

12.50 22-Jan-26

7.35

6.70

(0.15)

 

16.29 17-Mar-27

8.20

7.70

0.00

 

13.98 23-Feb-28

8.40

7.70

0.05

 

14.55 26-Apr-29

8.80

8.10

(0.65)

 

12.15 18-Jul-34

9.80

9.25

(0.25)

 

12.40 18-Mar-36

10.15

9.35

0.05

 

16.2499 18-Apr-37

10.10

9.45

0.10

 

14.80 26-Apr-49

10.05

9.85

(0.03)

 

 

Treasury Bills

At the OMO bills space, trade volumes continue to be low as local banks remain risk-off at current market levels at the short- to long-dated papers. Interests remained pegged on the mid-dated bills (January papers) with traded lower by 10bps for a consecutive session, closing at 4.00% on the offer.

We expect the markets to remain lethargic in the interim, as market participants hold their breath for a supply injection from the CBN to match OMO maturities of c.N88Bn scheduled for later this week.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 8/13/2020

4.50

0.01

(1.00)

NGOMO 9/3/2020

4.50

0.01

(1.00)

NGOMO 10/1/2020

5.00

0.01

(1.00)

NGOMO 11/03/2020

5.00

0.01

(1.00)

NGOMO 12/01/2020

5.50

0.01

(1.00)

NGOMO 02/02/2021

6.00

0.01

(1.00)

NGOMOB 0 03/02/21

6.00

0.01

(1.00)

NGOMOB 0 05/11/21

4.50

0.01

(1.00)

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 10/1/2020

2.50

0.01

(0.50)

NIGTB 11/12/2020

3.00

0.01

0.00

NIGTB 01/14/2021

3.00

0.01

(0.50)

NIGTB 02/11/2021

3.50

0.01

0.00

NIGTB 04/29/2021

3.50

0.01

(0.50)

NIGTB 05/13/21

4.00

0.01

0.00

NIGTB 06/10/21

4.00

0.01

0.00

 

Money Markets

Interbank rates remained stable in today's trade session, as local banks remain relatively liquid with no funding pressures on the horizon. System market liquidity improved to N211.47Bn positive opening, as OBB and OVN rates closed at 5.17% and 6.17% respectively.

We expect the market to remain stable at these levels heading into tomorrow's session.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

5.17

5.25

Overnight (O/N)

6.17

6.13

 

FX Market

Transaction volumes improved in the IEFX window, as c.$31.93m changing hands between market participants in 327 deals, ranging between N380.00/$ and N387.00/$. The closing rates remained unchanged across the various market segments, as the market continues to wait on the Apex bank for supply of the greenback.

 

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

381.00

381.00

CBN SMIS

380.69

380.69

I&E FX Window

385.50

385.50

Cash Market

473.00

473.00

Transfer Market

475.00

475.00

 

Eurobonds

The NGERIA Sovereigns resumed its bullish run in today's trading session, as demand improved across the sovereign curve, especially on mid-tenured papers, caused mostly by short-covering by market dealers. Yields compressed by an average of c.10bps across the sovereign curve. In the SSA space, the EGYPTs continued its rally for a second consecutive session, as prices on those papers consolidated with further gains (+50c) while the ANGOLs also strengthened (+25c).

The NGERIA Corps saw some profit-taking today, as sellers continued to offer most of the tracked papers. The ETINL 2024s remained the odd-on-out, as demand for that paper remained strong pushing yields further down by 59bps. 


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Related News

1.       CardinalStone Partners Limited Offering 7.0% Yield On Its 270-Day Commercial Paper

2.      Invest in FGN Monthly Bond Auction - August 2020

3.      Local Demand Returns Into The Bond Market As Yields Continue To Compress

4.      August 2020 FGN Savings Bonds Offer for Subscription

5.      Anchoria Fixed Income Monitor: Gold Remains Attractive to Investors


 Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP