Bond Market Trades on a Bullish Note Last Week With Yields Falling Across All Maturities

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Monday, October 08, 2018 / 10:08 AM / Anchoria AM Research

 

Money Market 

The money market rate increased significantly last week as the Overnight rate (OVN) and Open Buy Back (OBB) rose to 22.50% and 20.86% respectively. Consequently, the average money market rate rose by 15.20% to settle at 21.68% due a decrease in system liquidity to close at cN76bn as a result of outflow of cN553bn from OMO Sales and Wholesale, Invisibles and SME FX auction of $210mn in spite of an inflow of cN278.37bn from OMO T-Bills Maturities during the week. 

We expect rates to inch up on Monday as banks are expected to fund for another round of FX sales in the Wholesale, Invisibles and SME Market. Barring significant inflow during the week, the rate is expected to close the week higher.

 

Instrument

28/09/2018

05/10/2018

Change

OBB

6.00%

20.86%

+14.86%

OVN

7.17%

22.50%

+15.33%

Source: Anchoria AM Research, FMDQ OTC 

 

Forex: USD/NGN

The CBN Official rate continued on its upward trend to close at N306.40/$, a 0.02% increment, while the rate in the Investors and Exporters’ FX Window fell by 0.03% to close at N363.82/$. Naira at the parallel market remained unchanged to close at N361.00/$ (using the Everdon BDC Rate). 

We expect rates in the parallel market to remain constant as the apex bank continues to supply FX into the market coupled with its frequent Wholesale and Retail SMIS programme.

 

28/09/2018

05/10/2018

Change

CBN Official Rate

306.35

306.40

+0.02%

I&E FX Window

363.92

363.82

-0.03%

Everdon Rate

361.00

361.00

+0.00%

Source: Anchoria AM Research, FMDQ OTC

 

Commodities 

The Brent Crude oil and WTI Crude oil rose by 1.74% and 1.49% to close at $84.16 per barrel and $74.34 per barrel respectively. This is as a result of declines in Iranian exports due to pending U.S. oil sanctions and uncertainty surrounding the ability of other major oil producers to compensate for the shortfall from Iran. 

Other factors include; strengthening of the US dollar; reduction in supply from Venezuela.

 

Fixed Income

Bond

The Bond market traded on a bullish note last week with yields falling across all maturities traded except 2024, 2027 and 2036 bonds. This is against the backdrop of increased buying interest from local participants on longer tenor bonds. The JUL 2034 bond was the most traded bond during the week with N46.85bn value traded respectively. Average yield fell by 13bps to close the week at 14.78%. 

During the week, the following activities shaped investors sentiments: (a) Q4 Eurobond Launch; (b) FGN Bond Issuance Programme for Q4; (c) Anticipated second tranche of the FGN Sukuk Bonds.


Secondary Market

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Source: Anchoria AM Research, FMDQ OTC

 

Treasury Bills

Due to decreased system liquidity and following T-bills and OMO auction during the week, the treasury bills market traded on a bearish note. Consequently, the average yield rose significantly by 7bps to close the week at 13.26%. Market activities were relatively quiet as the value of transactions fell to N1.02trillion from N1.08trillion in the previous week.


Primary Market Auction

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Secondary Market

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Source: Anchoria AM Research, FMDQ OTC


 Proshare Nigeria Pvt. Ltd.


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