Yields Retreat as Global Oil Prices Plummet

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Tuesday, April 21, 2020 / 7:26 AM / By Zedcrest Capital / Header Image Credit: Money Crashers


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FGN Bonds

The local Bonds Market took a hit today, following a crash in global oil prices caused by zero demand amidst the COVID-19 pandemic. The trading session opened with expanded yields, a sign of uncertainty, as market players pondered implications of these low prices on the nation's federal budget and borrowing concerns ahead of tomorrow's monthly bond auction. Yields tightened somewhat later in the session with little volumes traded, the most active bond on the day were the 2023s maturity. Yields consequently ticked higher by c.39bps on the average across the benchmark bond curve.

 

Given the current market uncertainty, the DMO's monthly bond auction not have come at a worse time.  However, the DMO still has some wiggle room with rates expected to close around the last auction rates (still higher than current market levels).

 

FGN Bonds Auction Expectation - Apr. 22, 2020

Tenor

Offer (N'bn)

Expected Stop Rate (%)

Previous Stop Rate (%)

APR 2023

20.00

9.10 - 9.30

10.00

MAR 2035

20.00

12.15 - 12.60

12.50

APR 2050

20.00

12.65 - 13.00

12.98

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

6.84

5.12

1.03

 

16.39 27-Jan-22

8.28

5.91

1.53

 

12.75 27-Apr-23

9.79

8.89

(0.01)

 

14.20 14-Mar-24

9.78

8.92

(0.44)

 

13.53 23-Mar-25

12.41

9.62

0.53

 

12.50 22-Jan-26

12.49

10.60

0.73

 

16.29 17-Mar-27

12.04

11.56

0.38

 

13.98 23-Feb-28

12.06

11.69

0.09

 

14.55 26-Apr-29

12.11

11.72

(0.03)

 

12.15 18-Jul-34

12.37

11.86

0.09

 

12.40 18-Mar-36

12.84

11.91

0.49

 

16.2499 18-Apr-37

12.88

12.06

0.51

 

14.80 26-Apr-49

12.80

12.53

0.13

 

 

Treasury Bills

Rates in the OMO market ticked higher following selloffs by mostly foreign portfolio investors looking to de-risk in light of crashing oil prices. The selloff was not as intense as initially feared as demand from local banks with ample liquidity provided strong support at 11.00% levels, especially for the February and March maturities. Rates expanded by c.43bps on the average across the benchmark OMO curve 7.


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We expect rates to trade at the 11.00% support level in tomorrow's session, as buoyant system liquidity should continue to support local demand at these levels.


                                    Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOM 5/14/2020

10.00

7.00

1.30

NGOM 6/4/2020

10.00

6.00

1.00

NGOM 7/2/2020

10.00

7.00

0.00

NGOM 8/13/2020

10.00

7.00

0.00

NGOM 9/3/2020

10.25

8.50

0.25

NGOM 10/1/2020

10.00

8.00

0.00

NGOM 11/03/2020

10.50

8.00

0.50

NGOM 12/01/2020

10.75

8.50

0.25

NGOM 01/05/2021

11.75

10.00

1.25

NGOM 02/02/2021

11.00

9.00

0.10

NGOM 03/02/21

11.00

9.00

0.10



                                     Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 2-Jul-20

2.30

0.50

0.30

NIGTB 1-Oct-20

3.10

1.00

0.10

NIGTB 12-Nov-20

3.50

1.00

0.50

NIGTB 14-Jan-21

3.80

1.00

0.10

NIGTB 11-Feb-21

4.00

1.00

0.30

                                                                         


Money Markets

FX funding refunds pushed interbank system liquidity to open c.N825bn positive, highest levels seen in recent weeks. Money Market Rates continued to remain stable for another consecutive session, following little funding pressures for local banks. OBB and OVN rates closed at 2.00% and 2.63% respectively.


Rates are expected to remain stable in the interim, we do not see a major uptick in rates for the rest of the week.


                            Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

2.00

2.00

Overnight (O/N)

2.63

2.70


 

FX Market

Activity picked up for the Naira in today's trading at the I&E FX Window, although trade volumes continue to remain dismal. The Naira appreciated by 0.29% to close N1.13k stronger at N385.00/$. The CBN rates again remain unchanged.


A dearth of supply has weakened the Naira at the parallel market, as both cash and transfer rates lost N2.00k and N3.00k  to close at N416.00/$ and N435.00/$ respectively.


                                FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

 361.00

 361.00

CBN SMIS

 380.69

 380.69

I&E FX Window

 385.00

 386.13

Cash Market

 416.00

 414.00

Transfer Market

 435.00

 432.00

 


Eurobonds

It was yet another negative session for the NGERIA Sovereigns as the oil-producing nation cowers amidst plunging global oil prices. Uncertainties surrounding lack of demand and storage for crude oil has seen market players step back from oil-related papers, causing the sovereign yield curve to flatten.  Consequently, yields expanded by c.92bps on the average across the benchmark curve.


The NGERIA Corps papers traded on a quiet note, with a lot of requests for the papers intraday but with very little volumes traded. 


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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