CBN Responds to Global Economic Conditions; Depreciates Naira

Saturday, March 21, 2020 /12:40 PM / Zedcrest Capital / Header Image Credit: Ventures Africa

Below are highlights of trading activities in the fixed income and forex market on March 20, 2020

FGN Bonds

Yields in the Bonds Markets continued its recovery, as bids improved across the curve. The most axes remained on the mid- (2028s & 2036s) to long-end (2049s), as excess funds from matured funds and coupon payments fostered continued cherry-picking of bonds by local players. Yields compressed by c.5bps across the benchmark bond curve.

With Bond PMA and MPC meeting scheduled next week, we anticipate a cautious approach by market players, as they await the outcome of both events, to determine potential market direction.

Treasury Bills

The Treasury Bills market ended the week on a slightly active note, as we saw segmented activity on OMO maturities. The short-end of the curve had the most demand pressure, as banks looked to the short-end to properly manage excess liquidity from yesterday's OMO maturities. The long-end of the OMO curve (Jan-Mar 2021) was saturated with offers from offshore investors, but no bids to match, as banks were reluctant to reinvest at the long-end of the OMO curve. Yields expanded by an average of c.27bps across the benchmark OMO curve.

The NTB side continued to witness some slight sell-off, as local investors looked to other government-backed instruments, with the same duration but more attractive yields. Yields expanded by an average of c.308bps across the benchmark NTB curve.

We expect to see more supply from offshore investors, as they persistently look to offload their exposure in OMO bills.

Money Market

Despite CRR debit of c.N70bn, interbank rates still remained depressed D/D, as rates dropped by c.40bps. OBB and OVN rates closed the week lower at 4.80% and 5.30% respectively, as system liquidity opened with c.N466bn positive.

We expect rates to slightly increase as debits from FX Wholesale and Retail dwarfs expected inflows from OMO maturities (c.N75bn) next week.

FX Market

At the Interbank, the Naira/USD spot and SMIS rates remained stable to close the week at N307.00/$ and N358.51/$ respectively. At the I&E FX window, the Naira further depreciated against the dollar by N1.65k to close at N372.00/$.

At the parallel market, cash rates depreciated by N1 to close at N376.00/$, while the transfer rate remained unchanged at N400.00/$.

Today, the CBN adjusted its exchanges rates to the different market segments as follows:

i.    IMTOS to Banks - N376/$

ii.   Banks to CBN - N377/$

iii.  CBN to BDC - N378/$

iv.   BDCs to End-users - Not more N380/$

*IMTOs -International Money Transfer Operators

In addition to the above, unofficial sources confirm the apex bank also changed the rate at the I&E window for Foreign Investors to N380/$.

Eurobond

The NGERIA Sovereign saw some much needed respite, as the yields recovered across the sovereign yield curve, With the U.S President firmly stating a possible intervention in the price war between Saudi Arabia and Russia, this sparked a sharp recovery in oil prices with a c.9.15% increment. Yields compressed by an average of c.97bps across the sovereign yield curve.

Similarly, the NGERIA Corps tickers traded on a bullish note, as yields strengthened among most tracked papers, with yields on the ACCESS 2021s having the biggest D/D drop of c.774bps.

Related News

1.      Yields Continue to Recover, as the CBN Records a NO SALE at the OMO Auction

2.     Rates At T-Bills Primary Auction Closes Lower, Despite Low Crude Oil Prices

3.     Invest in FGN Monthly Bond Auction - March 2020

4.     Yields Continue to Rally in the Bonds Market as February Inflation Rate Rises to 12.20%

5.     Treasury Bill Auction Holds On Wednesday March 18th, 2020

6.     Bond Coupon Payment of c.N140bn Sparks a Slight Recovery in the Bonds Market

7.      Average Yield Dips Marginally to 3.9% Amidst Oil Price Decline

8.     The Bears Reigned Unhinged in the Fixed Income Market

9.     Interbank Rates Plunge as FX Retail Refund Impacts Positively on System Liquidity

10.  Axxela Funding 1 Plc - Up to N10bn Series 1 Bonds Issuance Coming Soon

11.   Bearish Sentiment Persists in the Fixed Income Space, as DMO Drops Rates at the T-Bills PMA

12.   DMO Revises Bond Auction Calendar, Issues New 15-year (2035s) and 50-year Bond (2050s) Maturities

13.   FCMB Announces Issuance of Commercial Paper of up to N20bn by First City Monument Bank Limited

14.   NSE Lists FGN Savings Bond Issued in February 2020