CBN Keeps A Tight Hold On System Liquidity In OMO Auction

Proshare

Friday, July 02, 2020 / 05:43 AM / by Zedcrest Capital / Header Image Credit: BusinessDay


Proshare Nigeria Pvt. Ltd.


FGN Bonds

The Bonds Market continued to trade with a bullish bias, with most of the action at the head and the belly of the curve. We noticed pockets on the demand particularly on the 2023s, 2027s, and 2029s papers, with the 2023s paper the biggest gainer from opening around 5.35% level and dropping almost c.55bps by the end of the day. At the tail of the curve, market interest was focused on the 2035s maturity, which dipped by another 10bps to close 9.90%. Yields further compressed by an average of c.6bps across the benchmark curve.

 

While market activities will most likely slow down during tomorrow's session, we expect the market to remain tilted towards bulls as demand persists.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

4.41

2.56

(0.07)

 

16.39 27-Jan-22

4.46

3.72

(0.05)

 

12.75 27-Apr-23

5.93

4.80

(0.33)

 

14.20 14-Mar-24

5.94

5.16

(0.41)

 

13.53 23-Mar-25

6.96

5.08

(0.01)

 

12.50 22-Jan-26

7.76

6.89

(0.01)

 

16.29 17-Mar-27

8.60

7.97

(0.09)

 

13.98 23-Feb-28

8.70

8.13

0.00

 

14.55 26-Apr-29

9.03

8.23

0.13

 

12.15 18-Jul-34

10.12

9.71

0.00

 

12.40 18-Mar-36

10.14

9.76

0.00

 

16.2499 18-Apr-37

10.12

9.82

0.00

 

14.80 26-Apr-49

10.97

10.60

0.00

 

 

Treasury Bills

It was a quiet session for OMO bills for most of the day, as the market focused on the much-anticipated OMO auction floated by the CBN to mop-up N157BN in maturing bills. We noted improved offers on most of the papers offered, with the market remaining one-sided; especially for January and February bills that were offered c.20bps (5.50%) above yesterday levels. We saw very limited bids thus making is quite difficult to match trades for the offer. The Apex bank floated and sold a total of N100Bn across the 3 tenors on auction following healthy demand (total subscription 1.77X offer amount), comfortably maintaining the stop rates in comparison with the last auction.

At the NTB space, we saw little interest in the newly issued 1-year paper albeit unattractive offers at 2.50% level, with little trade settling around this level. We also noticed improved interests in FGN Promissory Notes papers, which are better offered and readily available.

We expect to see a pickup in activity in tomorrow's trading session, especially on the newly issued OMO bills, although this could be tapered by the effect of expected outflows on system liquidity.

 

Primary Market Auction Result

OMO  - 02 Jul 2020

Tenor

Rate (%)

Offer (₦'bn)

Sub (₦'bn)

Sale (₦'bn)

Previous Rate (%)

Changes

89 days

4.950

10.00

14.12

10.00

4.9500

0.0000

194 days

7.790

10.00

15.29

10.00

7.7900

0.0000

341 days

8.990

80.00

148.03

80.00

8.9900

0.0000

 

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 8/13/2020

4.00

1.20

0.00

NGOMO 9/3/2020

5.00

1.20

0.00

NGOMO 10/1/2020

6.50

1.20

1.00

NGOMO 11/03/2020

6.75

1.20

1.15

NGOMO 12/01/2020

6.75

1.20

0.75

NGOMO 02/02/2021

7.00

1.20

0.50

NGOMOB 0 03/02/21

7.00

1.20

0.50

NGOMOB 0 03/02/21

7.00

1.20

0.50

NGOMOB 0 05/11/21

7.00

1.20

0.50

 

Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 10/1/2020

3.00

0.10

(0.50)

NIGTB 11/12/2020

3.50

0.10

(0.25)

NIGTB 01/14/2021

3.50

0.10

(0.50)

NIGTB 02/11/2021

4.00

0.10

0.00

NIGTB 04/29/2021

4.00

0.10

0.00

NIGTB 05/13/21

4.00

0.10

0.00

NIGTB 06/10/21

4.00

0.10

0.00

 


Money Markets

OBB and OVN rates nose-dived to single digits level as expected due to OMO and Swap maturities that were credited into the system. Rates dropped by an average of c.1230bps, as OBB and OVN closed at 2.80% and 3.60% respectively with market liquidity estimated to close at c.405BN.

We expect the drop in rates to reverse tomorrow as market participants scout to fund the bi-weekly FX retail intervention and (anticipated) CRR debit that will most likely hit the system liquidity.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

2.80

15.00

Overnight (O/N)

3.60

16.00

 

FX Market

The IEFX market traded on a very frail note with very little volume passing through the system. Although we saw a slight drop in rate, the market remains bided for most of the trading session. All other market segments remained unchanged except for the transfer market which depreciated by 1k D/D.

 

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

361.00

361.00

CBN SMIS

380.69

380.69

I&E FX Window

386.00

386.50

Cash Market

458.00

458.00

Transfer Market

460.00

460.00

 

Eurobonds

The NGERIA Sovereigns space was mostly quiet for a larger part of the trading session, with some trades seen at the belly of the curve. We noted more aggressive bids across the sovereign curve as oil prices continued to improve in the international market, the 2031s paper in particular which traded around 8.46%. Consequently, yields compressed by an average of c.6ps across the sovereign curve D/D.

Market activities increased slightly in the NGERIA Corps, especially on the ETINL 2024s which remained offered at 8.45%, although not met with eager bids, causing yields on the paper to expand c.4bps by the close of business.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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