Bond Yields Moderate Further Amid Continued Local Demand

Proshare

Thursday, August 01, 2019  / 07:32AM / By Zedcrest Capital / Header Image Credit: Naija247 News

 

Below are highlights of trading activities in the Fixed Income and FX Market today. 

 

Bonds

The FGN Bond market saw sustained demand pressures across the curve, notably from local portfolio investors. We noted demand concentrated across the mid- (FGN 2028s) and long-dated maturities (FGN 2036s and 2049s). Yields consequently compressed by c.4bps on the average across the sovereign bond curve.

 

We expect yields to remain relatively stable in the near term, due to sustained client interests.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

13.00

12.41

0.00

16.39 27-Jan-22

13.11

12.20

(0.01)

12.75 27-Apr-23

13.43

12.87

0.00

14.20 14-Mar-24

13.44

12.55

0.00

13.53 23-Mar-25

13.51

12.73

0.00

12.50 22-Jan-26

13.63

13.50

(0.07)

16.29 17-Mar-27

13.75

13.58

(0.02)

13.98 23-Feb-28

13.69

13.55

(0.10)

12.15 18-Jul-34

13.98

13.79

0.00

12.40 18-Mar-36

13.81

13.77

(0.18)

16.2499 18-Apr-37

13.80

13.70

(0.04)

14.80 26-Apr-49

14.06

13.95

(0.01)


Source: Zedcrest Dealing Desk

 

Treasury Bills

Trading in the T-bills market was mixed as market participants focused on the outcome of the PMA auction. Short-dated maturities continued to see demand supported by residual system liquidity from FAAC payments earlier in the week. We noticed some upward repricing of yields at the long end of the NTB curve, in anticipation for higher stop rates at the PMA. Yields consequently compressed by c.3bps on the average across the Benchmark NTB curve.

 

At the PMA, the DMO rolled over a total of N223.22Bn in maturing treasury bills across three maturities.  The stop rates were closed marginally higher for the 91- and 364-day tenors at 9.75% (+1bp) and 11.18% (+4bps) respectively while the 182-day closed lower at 10.60% (-15bps). Demand again was skewed to 364-day tenor, with a bid-to-cover ratio of 1.86X.

 

With OMO maturities of c.N89bn expected tomorrow, we remain cautious of an outside chance of an OMO auction by the CBN to manage excess liquidity. We expect yields to oscillate in tandem with system liquidity levels.

 

Primary Market Auction  Results - 31 July 2019

Tenor

Rate (%)

Offer (bn)

Sub ('bn)

Sale ('bn)

91-days

9.75

28.02

47.96

28.02

182-days

10.60

58.68

72.24

33.68

364-days

11.18

136.52

253.93

161.52

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

12-Sep-19

10.80

10.00

(0.20)

3-Oct-19

10.90

10.25

(0.10)

14-Nov-19

10.55

10.30

(0.45)

5-Dec-19

10.95

10.70

0.05

2-Jan-20

11.10

10.95

0.10

6-Feb-20

11.10

10.85

0.00

19-Mar-20

11.10

10.60

0.00

2-Apr-20

11.10

10.65

0.00

14-May-20

11.05

10.70

0.05

04-Jun-20

11.10

10.60

0.25

02-Jul-20

10.90

10.60

0.00

Source: Zedcrest Dealing Desk

 

Money Market

Rates in the money declined further by c.1.25pct amidst residual system liquidity, OBB and OVN rates consequently ended the session at 3.29% and 4.00% respectively.

 

We expect rates to remain relatively stable, as OMO maturities of c.N89bn are expected to hit the system tomorrow.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

3.29

4.57

Overnight (O/N)

4.00

5.21

Source: FMDQ, Zedcrest

 

FX Market

At the interbank, the Naira/USD rate remained stable at N306.85/$ (spot) and N357.68/$ (SMIS). The NAFEX closing rate strengthened from previous highs by 70k day-on-day to close at N361.68/$, as market turnover increased by 55% to $123m. At the parallel market, the cash and transfer rates remained stable at N357.50/$ and N362.00/$ respectively.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.85

306.85

CBN SMIS

357.68

357.68

I&E FX Window

361.68

362.39

Cash Market

357.50

357.50

Transfer Market

362.00

362.00

Source: CBN, FMDQ, REXEL BDC 


 

Eurobonds

The NGERIA Sovereigns saw mixed trading today, as investors awaited a rate cut by the US Federal Reserve. Demand remained for the some select papers, notably the 2032s and 2038s maturities, consequently yields closed flat across the papers on the sovereign curve.

 

Demand was also mixed across the NGERIA Corps papers in today’s trading session, as we witnessed gains on the Access 2021 (-12bps) and SEPPLN 2023 (-72bps) while the UBANL 2022 and ETINL 2024 expanded by +14bps and +9bps respectively.


 

Proshare Nigeria Pvt. Ltd.

 



Proshare Nigeria Pvt. Ltd.


 

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