Reduction in October Bond Auction Causes Yields to Crash 100bps In the FI Space Overnight

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Saturday, October 17, 2020 /07:04 PM / By Zedcrest Capital / Header Image Credit:Caixin Global



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Below are highlights of trading activities in the fixed income and forex market on October 16, 2020

 

FGN Bonds

Yields in the Bonds market continued on an aggressive bullish train following the release of the October bond auction circular by the DMO where only 30BN (2035s and 2045s papers only) are scheduled to be offered at the bond auction. The majority of the market actions were focused on the belly and the tail of the curve which lost an average of 50bps compared to yesterday's closing. The 2049s and 2050s paper were the major gainers in today's market, starting at 7.45% offer but shed c.35bps to close the day at 7.10%. Although by mid-day we began to see slightly improved offers causing a slight pull-back by the bulls in the market, however, this didn't linger as of these supplies were met by the readily available buyers.

 

We also saw high demand for 2034s, 2036s, and 2037s papers which also shed quite a sizable bps on its yield as it started off trading around 5.95% but closing the day at an average of 5.70% offer.

 

Next week, we expect market activities to kick off on a rather slow mood as the market awaits the outcome of a largely anticipated bond auction however, demand for bonds is not expected to dwindle in the interim while the bulls may continue to sort the limited available investment options available in the market.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

16.39 27-Jan-22

2.23

0.21

(0.28)

 

12.75 27-Apr-23

2.99

0.04

(0.01)

 

14.20 14-Mar-24

3.10

0.07

(0.09)

 

13.53 23-Mar-25

3.46

1.74

(0.00)

 

12.50 22-Jan-26

3.47

2.49

(0.87)

 

16.29 17-Mar-27

4.70

3.36

(0.99)

 

13.98 23-Feb-28

4.46

3.76

(1.22)

 

14.55 26-Apr-29

5.17

4.05

(0.51)

 

12.15 18-Jul-34

6.24

5.61

(1.66)

 

12.40 18-Mar-36

6.49

5.57

(1.41)

 

16.2499 18-Apr-37

6.73

5.80

(1.21)

 

14.80 26-Apr-49

7.42

7.12

(0.92)

 

 

Treasury Bills

The OMO bills space remained stayed one way i.e. largely bulls as local bank continually sorts for the few mid and long-dated bills not so available in the market. Despite the OMO auction of yesterday where the apex bank sold a rather small amount of 60BN, the market expected to see more sellers in today's market compared to yesterday, however, this wasn't the case. By mid-day, we saw few sellers of the newly issued Oct OMO bill which was quoted at 0.80% while bids stood wide apart at 1.40% making it difficult to deal.

The NTB space also saw slight action as unmet demand from Wednesday's auction continued to seep into the market today especially for the one-year paper which was offered around 0.90% levels.

 

We expect market appetite for bills from local banks to remain high especially on long-dated bills while supply stays limited.

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMO 11/03/2020

0.50

0.01

0.00

NGOMO 12/01/2020

1.00

0.75

(0.75)

NGOMO 01/05/2021

1.00

0.01

(0.75)

NGOMO 02/02/2021

1.50

0.01

(0.25)

NGOMOB 0 03/02/21

2.00

0.01

0.00

NGOMOB 0 05/11/21

2.00

0.01

0.00

NGOMOB 0 08/10/21

2.00

0.01

0.00

NGOMOB 0 09/07/21

2.00

0.01

0.00

NGOMO 11/03/2020

0.50

0.01

0.00

NGOMO 12/01/2020

1.00

0.75

(0.75)



Benchmark NTBills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 11/12/2020

0.50

0.01

0.00

NIGTB 01/14/2021

1.50

0.01

(0.25)

NIGTB 01/14/2021

1.50

0.01

(0.25)

NIGTB 02/11/2021

1.50

0.01

(0.25)

NIGTB 04/29/2021

2.00

0.01

0.00

NIGTB 05/13/21

2.00

0.01

0.00

NIGTB 06/10/21

2.00

0.01

0.00

NIGTB 07/01/21

2.00

0.01

0.00

NIGTB 08/26/21

2.00

0.01

0.00

NIGTB 08/26/21

1.65

0.01

(0.10)

NIGTB 09/09/21

1.80

0.01

(0.05)

NIGTB 11/12/2020

0.50

0.01

0.00

NIGTB 01/14/2021

1.50

0.01

(0.25)

 

Money Markets

OBB and OVN rates dropped by c.19% on the average compared to yesterday's close with little funding pressures added to local banks as market liquidity opened positive at c.N468BN.

 

 

We expect interbank rates to remain low at the beginning of the week especially as inflows from bond coupon is credited in the system but may adjust slightly upward by the end of the week as market sort to fund the bi-weekly retail intervention auction and bond auction of next week.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

1.17

1.33

Overnight (O/N)

2.00

2.17

 

FX Market

The FX market stayed very quiet for the most of the trading session with rates staying unchanged across the different market segments except at the IEFX market where the Naira  depreciated slightly by 0.16k closing the day at N389.98/$ albeit banks are still largely bided in that space.

 

FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

385.83

385.67

Cash Market

450.00

450.00

Transfer Market

455.00

455.00

 

Eurobonds

The trading day stayed fairly active in SSA Eurobonds as the market continues to trade on a bearish tone with growing fears for the second wave of COVID-related lockdown in some developed countries continued to fuel headwinds in the SSA papers, while the NIGERIA Sovereign and Angola Sovereign papers remained among the most active names traded. In other news, the Zambia government may be the first African country to default in debt interest payment which is expected to cause a slight pullback by investors in emerging market space.

 

 

The NIGERIA Corporates traded on a quiet session also as the only movement seen was on Zenith 2022s and SEPPLN 2022s compressing by -c.43bps and -c.30bps respectively.


 

 Proshare Nigeria Pvt. Ltd.

 

 


Proshare Nigeria Pvt. Ltd.




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