Bond Market Reacts Sluggishly as January Inflation Figure Rises to an 11-Month High

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Wednesday, February 19, 2020 / 07:00 AM / Zedcrest Capital / Header Image Credit: Money Check


Below are highlights of trading activities in the fixed income and forex market on February 18, 2020

 

FGN Bonds

The upward trajectory in bond yields continued in today's session, with the release of inflation figures earlier in the day. The bonds on offer (2023s, 2029s, 2049s) at the auction continued to see the most activity, as market players' sold-off in anticipation of tomorrow's bond PMA. Yields expanded by an average of 1bp across the benchmark bond curve.

 

The Nigerian Bureau of Statistics released inflation figures for the month of January 2020, with inflation rate rising to 12.13%, an 18bps rise from December's figure (11.98%). This was largely driven by the closure of Nigerian borders, which caused food inflation to increase by 18bps to clear at 14.85% for January 2020. Core inflation rose to 9.35%, a 2bps increment from the previous month (December).

 

We expect a quiet session, as market players shift their attention to the bond PMA. 


FGN Bond Auction Expectation  - 19 February 2020

Tenor

Offer (N'bn)

Expected Stop Rate (%)

Previous Stop Rate (%)

APR 2023

40.00

9.45 - 9.80

9.85

APR 2029

50.00

10.85 - 11.00

11.125

APR 2049

50.00

12.05 - 12.40

12.56














Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

8.32

7.16

(0.01)

 

16.39 27-Jan-22

8.18

7.25

(0.01)

 

12.75 27-Apr-23

9.44

9.02

0.00

 

14.20 14-Mar-24

10.01

9.38

0.06

 

13.53 23-Mar-25

9.86

9.53

(0.33)

 

12.50 22-Jan-26

10.42

9.78

0.15

 

16.29 17-Mar-27

11.00

10.35

0.07

 

13.98 23-Feb-28

10.84

10.60

0.08

 

12.15 18-Jul-34

11.40

11.14

0.11

 

12.40 18-Mar-36

11.34

11.15

0.03

 

16.2499 18-Apr-37

11.33

11.04

0.00

 

14.80 26-Apr-49

12.39

12.32

0.00

 



Treasury Bills

The Treasury Bills market continued to see sustained demand, despite the release of inflation figures. We saw demand on short (28-may) and long-dated (Jan/Feb) as decent liquidity spurred a drop in yields. Consequently, yields dropped by c.17bps across the benchmark OMO curve. 


Similarly on the NTB side, we saw pockets of demand on the short (30-Apr) to long-end (28-Jan) NTBs, as local investors locked in idle funds.


We expect sustained demand in tomorrow's session, as market players seek to reinvest incoming OMO maturities of c.650bn.  


Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 19-Mar-20

12.60

12.10

(0.15)

NGOMO 2-Apr-20

12.50

11.50

(0.25)

NGOMO 14-May-20

12.35

10.00

(0.25)

NGOMO 4-Jun-20

12.25

11.00

(0.35)

NGOMO 2-Jul-20

12.40

10.00

(0.25)

NGOMO 13-Aug-20

12.40

11.95

(0.25)

NGOMO 3-Sep-20

12.60

12.20

(0.05)

NGOMO 1-Oct-20

12.70

12.45

(0.05)

NGOMO 3-Nov-20

12.70

12.30

(0.05)

NGOMO 1-Dec-20

12.50

12.45

(0.25)

NGOMO 5-Jan-21

12.60

12.45

0.05

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 2-Apr-20

6.00

1.00

0.00

NIGTB 2-Jul-20

7.00

1.00

1.00

NIGTB 1-Oct-20

7.00

2.00

0.00

NIGTB 14-Jan-21

7.00

2.00

(0.50)

`                                                                             


Money Market

Interbank rates slightly inched up by c.60bps, as the release of inflation figures caused a slight reaction in the market, despite system liquidity opening with c.N396bn positive. OBB and OVN rates closed at 3.42% and 4.17% respectively.

 

We still expect rates to stay depressed in light of excess liquidity.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

3.42

2.92

Overnight (O/N)

4.17

3.50

 


FX Market

At the Interbank, the Naira/USD spot and SMIS rates remained unchanged at N306.95/$ and N358.51/$ respectively. Similarly, the Naira was unchanged at the I&E FX window, closing at N364.95/$.

 

At the parallel market, the cash rate depreciated by 50k to close at N358.50/$, while the transfer rate remained unchanged to close at and N364.50/$ respectively. 


Eurobond

The NGERIA Sovereign tickers reopened Post-Presidents' day holiday on a bearish note, as yields retraced across the curve. Crude oil price dropped by 1.33% D/D, causing a sell-off of bonds by investors. Yields expanded by c.3bps across the Sovereign yield curve.

                          

On the contrary, we saw decent demand in the NGERIA Corps tickers, as yields on the SEPLLN 2023s witnessed the most dip (c.3bps), while the ACCESS 2021s and UBANL 2023s dropped by c.1bp apiece. 


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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