Coupon Reinvestment Bullish For FGN Bonds

Proshare

Thursday, September 19, 2019 / 11:25 AM / By Zedcrest Capital / Header Image Credit: The Wire


Below are highlights of trading activities in the fixed income and forex market on September 18, 2019 

 

Bonds

The Bond market continued its bullish run for the second consecutive trade session, as flows from bond coupon payments continued to fuel demand. We noted sustained demand interests for long-dated maturities, most notably the 2037s. Spreads tightened across the curve, as bids improved across the mid- to long-end of the curve.  Yields consequently closed the session lower by c.3bps on the average across the FGN benchmark curve.

 

We maintain our cautious outlook for bonds, as the current bond demand could be short-lived.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.62

13.82

0.06

16.39 27-Jan-22

14.55

13.92

0.05

12.75 27-Apr-23

14.57

14.27

0.17

14.20 14-Mar-24

14.35

13.74

(0.01)

13.53 23-Mar-25

14.34

14.06

0.01

12.50 22-Jan-26

14.26

14.01

(0.09)

16.29 17-Mar-27

14.22

14.05

(0.09)

13.98 23-Feb-28

14.36

14.05

(0.22)

12.15 18-Jul-34

14.48

14.34

(0.15)

12.40 18-Mar-36

14.52

14.30

0.02

16.2499 18-Apr-37

14.49

14.26

(0.04)

14.80 26-Apr-49

14.60

14.43

(0.12)


Source: Zedcrest Dealing Desk
 


 

Treasury Bills

The T-bills market continued traded mixed as we noted better sellers of securities at the long of the NTbills curve as market participants offloaded positions in anticipation of supply from the PMA. Yields Expanded by c.7bps on the average across the NTbills benchmark curve.

 

At the PMA, the DMO rolled over a total of c.N179.75bn across three tenors on offer. As expected, stop rates foe the 91- and 182-days cleared lower than the previous auction, whilst the 364-day closed 10bps higher bringing the auction stop rate closer to secondary market levels.

 

With OMO maturities of c.N356bn coming into the system, we expect the CBN to float an OMO auction to manage excess liquidity. The outlook for the secondary market remains bearish amidst tight liquidity.

 

NTB Auction Results - 18 Sept. 2019

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

91-days

11.10

3.00

4.46

3.00

182-days

11.75

8.39

12.36

8.39

364-days

13.30

168.36

359.96

168.36

 

Benchmark Treasury Bills

 

Description

Bid (%)

Offer (%)

Day Change (%)

 

3-Oct-19

12.65

12.10

0.05

 

14-Nov-19

12.65

11.20

0.00

 

5-Dec-19

13.00

12.35

0.50

 

2-Jan-20

13.00

12.50

0.00

 

6-Feb-20

13.00

12.70

0.00

 

19-Mar-20

12.30

12.10

0.00

 

2-Apr-20

13.10

12.85

0.00

 

14-May-20

13.25

12.85

0.15

 

04-Jun-20

13.45

12.60

0.05

 

02-Jul-20

13.50

12.50

0.10

 

13-Aug-20

13.50

13.25

0.00

 

Source: Zedcrest Dealing Desk

 


Money Market

Money Market rates closed the session lower as reduced funding pressures allowed market participants to benchmark interbank takings to the CBN SLF window rates. System liquidity opened at c.N41bn positive, supported by inflows from FGN bond coupon payments. OBB and OVN rates consequently ended the day lower at 14.57% and 15.57% respectively.

 

We expect money market rates to close lower in the coming session of the back of OMO maturities expected.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

14.57

17.00

Overnight (O/N)

15.57

18.29

Source: FMDQ, Zedcrest



FX Market

At the interbank, the Naira/USD spot and SMIS rates remained stable to close at N306.90/$ and N358.02/$ respectively. At the I&E window, the closing rate for the Naira depreciated by 17k to close the trading session at N362.46/$.

The cash and transfer rates at the parallel markets saw no change, closing at N357.50/$ and N362.50/$ respectively.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.90

306.90

CBN SMIS

358.02

358.02

I&E FX Window

362.46

362.29

Cash Market

357.60

357.60

Transfer Market

362.50

362.50

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The NGERIA Sovereigns profited from expectation of a rate cut by the US Federal Reserve at its FOMC meeting. Yields compressed by c.3bps on the average across the sovereign curve, following its peers in the emerging markets as global investors hunt for yield is supported by lower rates in the US. The FOMC cut rates by 25bps, however the voting pattern among its members showed an unwillingness for further rate cuts this year. The FED Chair also noted that the committee is contemplating 'faster than organic' growth of its balance sheet over the coming months, signaling considerations for a pseudo ‘Quantitative Easing’ package.

 

The NGERIA Corps traded mixed as we noted continued demand interest for the FIDBAN 22s well investors looked to offload the ACCESS 21s and Zenith 2022s.


 

Proshare Nigeria Pvt. Ltd.


 

 Proshare Nigeria Pvt. Ltd.

 

 

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3.     Treasury Bill Auction Schedule For September 18th, 2019

4.     Average Money Market Rate Rose Significantly By 20.04% To Settle At 23.57% From 3.54%

5.     The Bears Take Center Stage As Average T-Bills Yield Advances 8bps WoW To 13.4%

6.     CBN Maintains Stop Rates at OMO Auction, Tightening System Liquidity

7.     A Quiet Trading Session as Global Oil Pressure Weigh on Nigerian Sovereign Eurobonds

8.     CBN Maintains OMO Auction Rate for Third Consecutive Time, Eases Market Sentiments

9.     Buoyant System Liquidity Pressures Average Yield Down To 13.3%

10.  T-bills Trade Bullish to Close the Week as CBN Stalls on OMO Auction

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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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