Bond Yields Retrace Higher Following Q3 FGN Bond Calendar Release

Proshare

Thursday, July 18 2019  08:10PM / Zedcrest Capital / Header Image Credit: ARM

 

Below are the highlights of trading activities in the fixed income and forex market today.

 

Bonds

In the FGN Bond market, spreads widened as bids pulled higher in response to the release of the FGN Bond Circular for the month, where the DMO indicated its intension to offer N145bn of the 5, 10 and 30yr bonds at an auction scheduled for the 24th of July. Offers however remained depressed as demand interests persisted, mostly from real money accounts looking to reinvest their coupon inflows.

 

We expect yields to be relatively stable at current levels as the CBN maintains light issuance of OMO T-bills in the Money Market.

 

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

13.64

12.73

0.20

16.39 27-Jan-22

13.82

12.96

0.22

12.75 27-Apr-23

13.96

13.27

0.27

14.20 14-Mar-24

14.03

13.18

0.14

13.53 23-Mar-25

14.04

12.88

0.39

12.50 22-Jan-26

14.11

13.69

(0.13)

16.29 17-Mar-27

14.19

13.80

0.09

13.98 23-Feb-28

13.78

13.65

0.06

12.15 18-Jul-34

14.26

14.09

0.03

12.40 18-Mar-36

14.12

14.03

(0.04)

16.2499 18-Apr-37

14.18

13.99

0.04

14.80 26-Apr-49

14.32

14.17

0.12


Source: Zedcrest Dealing Desk



Treasury Bills

The T-bills market traded on a relatively flat note, as demand interests softened following an OMO announcement by the CBN. The Auction was significantly oversubscribed at 6.33X bid to cover, but the CBN sold only the total offered amount of N75bn with stop rates maintained at their previous auction levels across the three tenors offered.

 

Despite the auction stop rates clearing c.100bps above current market levels, we expect the market rates to remain relatively stable, due to the significantly large amount of unfilled bids at the auction.



 

OMO  Auction Result

Tenor

Rate (%)

Offer (N’bn)

Sub (N'bn)

Sale (N'bn)

91 day

11.40

10.00

41.19

10.00

182 day

11.84

15.00

56.43

15.00

364 day

12.25

50.00

377.45

50.00

Source: CBN



Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

1-Aug-19

10.50

9.10

0.00

12-Sep-19

10.60

9.70

0.00

3-Oct-19

10.60

9.70

(0.10)

14-Nov-19

10.80

9.95

0.10

5-Dec-19

10.85

10.05

0.05

2-Jan-20

10.85

10.30

0.00

6-Feb-20

11.15

10.90

(0.10)

19-Mar-20

11.15

10.90

(0.10)

2-Apr-20

11.10

10.80

(0.15)

14-May-20

11.15

10.90

(0.10)

04-Jun-20

11.20

10.95

0.15

Source: Zedcrest Dealing Desk 

 

 

Money Market

Rates in the money market were slightly higher by c.3pct, as dealers reacted to the OMO announcement by the CBN. The OBB and OVN rates consequently ended the session at 6.29% and 7.00%, with system liquidity currently estimated at c.N180bn positive.

 

We expect rates to trend higher tomorrow, as banks fund for the bi-weekly retail FX sales by the CBN.


 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

6.29

3.86

Overnight (O/N)

7.00

4.50

Source: FMDQ, Zedcrest

 

 

 

FX Market

At the interbank, the Naira/USD rate remained stable at N306.95/$ (spot), and N357.70/$ (SMIS). The NAFEX closing rate at the I&E was relatively unchanged at N361.62/$, whilst the market turnover moderated further by 40% to $167m. At the parallel market, the cash and transfer rate remained stable at N358.10/$ and N361.50/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

357.70

357.70

I&E FX Window

361.62

361.61

Cash Market

358.10

358.10

Transfer Market

361.50

361.50

Source: CBN, FMDQ, REXEL BDC 

 

 

 

Eurobonds

The NGERIA Sovereigns weakened slightly, with yields higher by c.2bps, following a further c.3pct decline in oil prices. Signs of softer negotiations between the US and IRAN strengthened bearish sentiments within the oil market.

 

In the NGERIA Corps, Demand interests remained firm, with the UBANL and FIDBAN 22s outperforming other traded tickers with c.0.2pct PX gains during the session.



Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd. 

 

 

Related News

 

1.       Invest in FGN Monthly Bond Auction – July 2019

2.      NAFEX Rate Trends Higher as Offshores Take Profit on Bills

3.      Bond Yields Trend Lower as Market Players Re-Invest Coupon Inflows

4.      CBN Treasury Bill Auction Scheduled For July 17th, 2019

5.      Offshore Investors Rally 10-Year Bond following Decline in CPI Inflation

6.      Average Money Market Rate Went Down By 1.65% To Settle At 2.57% From 4.22%

7.      Bullish Momentum Sustained as Average T-Bills Yield Contracts 80bps to 11.1%

8.      Coupon Payments to Sustain Demand Interests on FGN Bonds

9.      DMO Releases Q1 2019 Public Debt Data – Marginal Increase of 2.3% in Total Public Debt Recorded

10.   Dangote Cement Plc Series 11, 12 and 13 Commercial Paper Opens

11.    Bond Yields Trade Flat as Market Players Await Q3 Calendar Release


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