Bonds & Fixed Income | |
Bonds & Fixed Income | |
586 VIEWS | |
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Thursday, December 03, 2020 / 11:17 AM / by Zedcrest Capital / Header Image Credit: FMDQ Academy
It was a
haywire trading session for FGN Bonds, as the market reacted negatively to the
introduction Special Bills for excess Cash Reserve Requirement balances
announced by the CBN via a circular. The market opened the session with very
wide bid-ask spreads (average of 340bps across the curve) as participants
remained unsure of how-to price-in the effects of the new instruments. Bids
later improved at the long-end of the curve, with the 2049s and 2050s papers
settling at 7.20% with decent volumes crossed at those levels. Yields rose by
c.231bps on the average across the benchmark bond curve by the close of the
session.
We expect
the uncertainty in the market to endure albeit with toned-down volatility.
Current elevated yields also present good buy opportunity for some local
institutional investors with residual liquidity. Yields should remain stable
with tighter spreads in tomorrow's trading session.
Benchmark FGN Bonds |
||||
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
|
16.39 27-Jan-22 |
4.60 |
1.04 |
3.72 |
|
12.75 27-Apr-23 |
5.93 |
1.99 |
3.65 |
|
14.20 14-Mar-24 |
4.99 |
2.13 |
2.07 |
|
13.53 23-Mar-25 |
6.99 |
2.20 |
3.99 |
|
12.50 22-Jan-26 |
6.96 |
3.60 |
3.06 |
|
16.29 17-Mar-27 |
7.00 |
3.80 |
2.61 |
|
13.98 23-Feb-28 |
7.00 |
4.15 |
2.60 |
|
14.55 26-Apr-29 |
7.00 |
4.20 |
2.61 |
|
12.15 18-Jul-34 |
7.15 |
5.20 |
1.85 |
|
12.50 27-Mar-35 |
7.02 |
5.20 |
1.72 |
|
12.40 18-Mar-36 |
7.50 |
5.20 |
2.20 |
|
16.2499 18-Apr-37 |
7.50 |
5.20 |
2.20 |
|
9.80 24-Jul-45 |
7.50 |
5.64 |
1.35 |
|
14.80 26-Apr-49 |
7.50 |
6.90 |
0.47 |
|
12.98 27-Mar-50 |
7.50 |
6.90 |
0.50 |
|
Treasury Bills
Treasury
bills also had a bearing session, as the expectation of supply from the CBN Special Bills caused bid in the market to evaporate. Local banks and offshore
investors, the only holders of current OMO bills, flooded the market with
offers of OMOs and NTBs across the board but with no bidding interests. The
long-dated papers remain the most liquid, with offers for the 1-year papers
coming out as high as 0.50% (another 10bps uptick recorded in consecutive
sessions). Rates expanded further by c.45bps on the average across the
benchmark OMO and NTB curves, with both papers interestingly priced at similar
levels for the first time all year.
The jury
remains out on the full effects of the expected Special Bills on the current
market dynamics. The tradability of the Special Bills between banks, retail and
institutional investors pose a threat to the allure of treasury bills rates,
especially NTBs. We expect rates in the markets to remain pressured, as current
holders seek to offload their stock before rates move significantly against
them.
Benchmark OMO Bills |
|||
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
NGOM 01/05/21 |
0.50 |
0.15 |
0.35 |
NGOM 02/02/21 |
0.50 |
0.20 |
0.35 |
NGOM 03/02/21 |
0.80 |
0.20 |
0.45 |
NGOM 05/11/21 |
0.80 |
0.30 |
0.45 |
NGOM 06/08/21 |
0.80 |
0.30 |
0.45 |
NGOM 08/10/21 |
0.80 |
0.35 |
0.45 |
NGOM 09/07/21 |
1.00 |
0.45 |
0.55 |
NGOM 10/19/21 |
1.00 |
0.50 |
0.55 |
Benchmark NTBills |
|||
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
NIGTB
12/31/20 |
0.50 |
0.15 |
0.35 |
NIGTB
01/14/21 |
0.50 |
0.20 |
0.35 |
NIGTB
02/11/21 |
0.80 |
0.20 |
0.45 |
NIGTB
03/11/21 |
0.80 |
0.30 |
0.45 |
NIGTB
04/29/21 |
0.80 |
0.30 |
0.45 |
NIGTB
05/13/21 |
0.80 |
0.35 |
0.45 |
NIGTB
06/10/21 |
1.00 |
0.45 |
0.55 |
NIGTB
07/01/21 |
1.00 |
0.50 |
0.55 |
NIGTB
08/26/21 |
0.50 |
0.15 |
0.35 |
NIGTB
09/09/21 |
0.50 |
0.20 |
0.35 |
NIGTB 10/14/21 |
0.80 |
0.20 |
0.45 |
Money Markets
Money market rates remained
stable in today's session, with no immediate pressure on the system. System
liquidity opened the session at N635Bn (1.13% higher D/D), while the OBB
and OVN rates closed at 0.67% and 1.00% respectively.
We expect rates to remain stable in
the interim, with outflows from Retail FX interventions not expected until later
in the week.
Money Market Rates |
||
|
Current (%) |
Previous (%) |
Open Buy Back (OBB) |
0.67 |
0.75 |
Overnight (O/N) |
1.00 |
1.00 |
FX Market
The
parallel market reversed the previous day's trend as market participants mopped
up all the supply from yesterday's panic selling following the CBN's circulars
on IMTO flows. The previous day's gains on the cash rates were all but wiped
out, opening the session at N450/$ but rising quickly to close at N475.00/$
marking 3.26% depreciation in a single day. The transfer rate which has
remained less volatile continued its gradual appreciation, gaining N5.00
(1.01%) to close at N490.00/$.
We expect
parallel market rates to converge as the demand for USD cash continues to
pressure the markets, while the official markets continue to expect the CBN to
beef-up the volumes of its intervention sales to boost liquidity in that space.
FX Market |
||
Current (N/$) |
Previous (N/$) |
|
CBN Spot |
379.00 |
379.00 |
CBN SMIS |
380.69 |
380.69 |
I&E FX Window |
395.00 |
394.00 |
Cash Market |
475.00 |
460.00 |
Transfer Market |
490.00 |
495.00 |
Eurobonds
Yields on the NIGERIA
Sovereigns posted a second consecutive positive session, as demand for
the sovereign papers improved. We noted demand across the sovereign curve, with
the biggest moves seen at the short-end of the curve. Consequently, yields
compressed further by c.10bps on the average across the sovereign curve.
The NIGERIA
Corporates has a less active session, with improved demand on the
tracked papers matching the supply seen. Most trades we witnessed crossed at
the market bids as offshore appetite for yield strengthened.
Related News
1.
CBN To Securitize Excess Cash Reserve Requirement
Balances for Local Banks As Special Bills
2. CBN Looks to Improve Retail FX Liquidity in The Parallel
Market Through a Series of Directives
3.
Anchoria Fixed Income Monitor: Interbank System Awash
With Liquidity
4. Investors' Sentiment Remain Weak in the NT-Bills
Secondary Market as Average Yield Closes Flat
5.
FX Rates Remain Under Pressure As CBN Devalues Rates At
Its Official Window
6.
364-Day T-bill at 0.15% Yield: How Low Can It Get?
7. Treasury Bill Auction Holds Wednesday November 25th, 2020
8. Average Yield in the NT-Bills Secondary Market Closes
Flat as Weak Sentiments Persist
9. Anchoria Fixed Income Monitor: Naira Defies Liquidity
Boost, Depreciates Further Against Dollar