Demand For Long Term Bonds Pressure Yields Marginally Lower

Proshare

Thursday, May 02, 2019   /  07:00PM  / Zedcrest Capital / Header Image Credit: Moneycontrol

 

Earlier today, the Debt Management Office (DMO) disclosed that the debut 30-Year FGN Bond was oversubscribed at the April Auction. According to the DMO, a total subscription of N80.41 billion was received from investors for the N20 billion offered by the DMO for the 30-year Bond, representing a 400% subscription rate. The office, noted that most of the subscriptions came from asset managers and insurance companies who have been looking for long-term, good quality assets to buy in order to match their liabilities.

 

Below are highlights from activities within the Fixed Income and FX market today. 

 

Bonds Market

The Bond market traded on slightly bullish note, with yields compressing marginally by c.4bps following slight demand on the long end of the curve. The most demand was witnessed on the FGN 2037s which compressed by c.11bps on the day. 

We expect yields to remain relatively stable in the near term, with forward positioning expected to remain slightly bullish. We however expect to see some renewed profit taking at levels below c.14.50%

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.66

14.41

(0.08)

16.39 27-Jan-22

14.64

14.42

(0.03)

12.75 27-Apr-23

14.60

14.45

0.00

14.20 14-Mar-24

14.43

13.97

(0.05)

13.53 23-Mar-25

14.55

14.21

0.00

12.50 22-Jan-26

14.57

14.47

(0.03)

16.29 17-Mar-27

14.60

14.52

0.00

13.98 23-Feb-28

14.58

14.49

0.00

12.15 18-Jul-34

14.60

14.44

(0.04)

12.40 18-Mar-36

14.60

14.53

(0.05)

16.2499 18-Apr-37

14.51

14.49

(0.11)

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market traded traded on a slightly bullish note, with yields compressing by c.5bps following lower clearing rates on the 91 (-10bps) and 182-day (-1bp) bills at the CBN’s NTB Auction. The long end of the curve however remained relatively flat, as stop rates inched 5bps higher from previous auction levels on the 364-day PMA bill offered.

We expect yields to inch slightly higher tomorrow, as market players anticipate a renewed OMO offering by the CBN due to the robust sytem liquidity levels.

 

NTB Auction result

Tenor

Rate (%)

Offer (’bn)

Sub ('bn)

Sale ('bn)

91-days

10.00

28.02

43.72

28.02

182-days

12.49

43.52

29.85

10.62

364-days

12.77

38.17

157.63

71.07

Source: CBN

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

13-Jun-19

11.25

6.00

0.00

18-Jul-19

11.50

10.00

0.00

1-Aug-19

10.50

10.25

(0.50)

12-Sep-19

12.75

12.50

(0.15)

3-Oct-19

12.90

12.85

(0.05)

14-Nov-19

12.75

12.50

0.05

5-Dec-19

12.90

12.75

(0.05)

2-Jan-20

12.95

12.70

0.00

6-Feb-20

12.95

12.80

0.00

19-Mar-20

12.85

12.75

0.05

2-Apr-20

12.85

12.60

0.05

Source: Zedcrest Dealing Desk

 

Money Market

The OBB and OVN rates declined further, with inflows from OMO maturities bolstering system liquidity further to c.N300bn positive. The OBB and OVN rates consequently ended the session at 6.14% and 7.29% respectively.

 

We expect rates to close the week in single digit territory, barring a significant OMO sale by the CBN tomorrow.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

6.14

8.96

Overnight (O/N)

7.29

9.82

Source: FMDQ, Zedcrest Research 

 

FX Market

At the Interbank, the Naira/USD rate was unchanged at N306.95/$ (spot) and N356.46/$ (SMIS). The NAFEX closing rate in the I&E window however depreciated by 0.08% to N360.91/$, whilst market turnover improved slightly by 7% to $189m. At the parallel market, the cash rate depreciated by 0.06% to N358.90/$, whilst the transfer rate remained unchanged at N363.50/$.

 

Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

356.46

356.46

I&E FX Window

360.91

360.63

Cash Market

358.90

358.70

Transfer Market

363.50

363.50

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns traded with mixed sentiments, with significant gains in prices offset by some profit taking later in the session. Yields consequently closed lower by c.4bps on the day.

 

In the NGERIA Corps, investors remained bullish on the ETINL 24s, with resurgent interests also witnessed in the SEPLLN 23s which gained c.20pct on the day.

 

Proshare Nigeria Pvt. Ltd.

                                                                                                                      

For enquiries contact research@zedcrestcapital.com

 

 

Proshare Nigeria Pvt. Ltd.


Related News

1.       Debut 30-Year FGN Bond Oversubscribed At April Auction

2.      CBN to Auction c.N110bn T-Bills upon Resumption from Break

3.      Average Money Market Rate Rose By 6.65% To Settle At 16.86%

4.      Average Yield Contracts to 13.1% Amidst Buying Interests; PMA Holds on Thursday

5.      Summary of April 2019 FGN Bond Auction Results

6.      Average Yield Moderates to 13.3% on Absence of OMO Auctions

7.      Average Money Market Rate Fell By 10.72% To Settle At 10.22%

8.     Invest in FGN Monthly Bond Auction – April 2019



Proshare Nigeria Pvt. Ltd.
READ MORE:
Related News
SCROLL TO TOP