Tuesday, December 1, 2020 / 9:03 AM / By Zedcrest Capital / Header Image Credit: The Guardian Nigeria

FGN Bonds

The FGNBonds market opened trading right where it left off last week, as yieldscontinued to rise amidst sustained apathy for bonds by local investors at theselevels. Yields expanded by another c.24bps on the average across the benchmarkbond curve, as offers improved across the curve with the most actively tradedsecurity on the day being the 2026s paper.

Themarket is expected to remain testy as the direction of yields remains unclear inthe interim, and the PFAs continue to remain on the side-lines at these levels.

Treasury Bills

And in a similarfashion, OMO rates ticked up across the board as supply continued to outweighdemand for a second consecutive trading session. The long-dated maturitiesremained the most pressured with offers as high as 0.30% (15bps uptick D/D), asoffshore investors continue to gradually exit holdings in local OMOs as the CBNimproves FX supply at the I&E FX window. Consequently, rates across thebenchmark OMO curve weakened by 3bps on the average.

We expectrates to continue to falter in the market as local banks look away fromimproved rates in order to prioritise proving liquidity for FX-related systemoutflows.

Money Markets

System liquidity continued todwindle off the back of FX intervention related outflows, opening up c.N229Bnpositive (24.47% lower D/D). Money market rates remained stable, with OBB andOVN rates closing at 1.13% and 1.44% respectively.

We expect rates to remain stablefor the rest of the week, especially with OMO maturities of N419Bn expected tohit the system tomorrow.

FX Market

Volumestraded in the I&E FX market dipped further for a second consecutivesession, dropping by 65% to close at only $35million in value traded, andleaving the closing rate unchanged at N390.25/$. The Apex bank once againintervened in the market, selling c.$41million around N390.00/$ (N2.25 lowerD/D) to foreign portfolio investors looking exit the Nigerian markets. 

Rates inthe parallel maker market also remained fairly stable opening the week, withthe cash rate unchanged at N495.00/$ while the transfer market appreciated byN1.00 to close at N504.00/$.

In whatcan be termed 'Circular Day', the CBN released another two circulars revisingoperational guidelines for various market segments. The first, titled "OPERATIONS OF DOMICILIARY ACCOUNTS", served as clarifications for guidelineson operations of domiciliary accounts, stressing that ordinary account holdersbe allowed unrestricted use of their electronic/wire transfer funds for 'eligible transactions' while existing regulations on cash lodgements remain inplace. The second circular titled "AMENDMENT TO PROCEDURES FOR RECEIPT OFDIASPORA REMITTANCES", saw the Apex bank revert from its previous stance ondollar remittances into the country by allowing beneficiaries of theseremittances receive the inflows in FX (USD) either in cash or in their ordinarydomiciliary accounts.

Throughboth circulars, the Apex bank hopes to improve the liquidity in the retail FXmarket by encouraging more FX inflows into Nigeria through diasporaremittances, with a view to bringing down the rates on the parallel market withthe anticipated supply.

Eurobonds

Yields on sovereign papers in the Sub-Saharan Africaspace took a hit in today's trading session following lower oil prices as theOPEC+ failed to conclude on an agreement of extensions of crude oil production,the ANGOLA papers the most hit. Yields on the NIGERIA Sovereign papers also rose, moving higher by c.2bps on theaverage across the sovereign curve. We noted the weakness mostly at the mid- tolong-end of the curve.

The NIGERIACorporates on the flip side continued to strengthen, with demand notedon some of the tracked papers. The Zenith 2022s led the gainers as yieldsdipped by c.27bps on the paper, with other gainers ACCESS 2021s (1bps) andFBNNL 2025s (3bps).

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