FGN Bonds Market Closed the Week on a Negative Note as T-Bills Secondary Market Took a Backseat

Sunday, February 14, 2021 09:00 AM / by Zedcrest Capital / Header Image Credit: Capital

Beloware highlights of trading activities in the fixed income and forex marketon February 12, 2021.

FGN Bonds

The FGN Bonds market closed the week on a negative note, as the marketcontinued to demand for higher yields in response to the sustained increase inshort-term interest rates. We witnessed supply across the bond curve, withsellers hitting any bid available. Yields on the mid-tenor papers (2026s to2029s) moved higher by 15bps on the average, with bids peaking at 10.65% onthose papers. The papers at the long-end tested the 11.00% levels, afterinitial trades happened at between 10.90% to 10.95% earlier in the tradesession. Yields expanded by c.8bps on the average across the benchmark curve atthe close of trading.

We expect the upward pressure on bond yields to be sustained in thecoming week, as investors remain weary of taking on duration amidstexpectations for continued volatility.

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
12.75 27-Apr-23	8.41	6.76	(0.68)
14.20 14-Mar-24	9.24	7.46	0.35
13.53 23-Mar-25	9.33	8.41	0.00
12.50 22-Jan-26	10.38	9.70	0.14
16.29 17-Mar-27	10.65	10.02	0.15
13.98 23-Feb-28	10.65	10.31	0.15
14.55 26-Apr-29	10.65	10.24	0.04
12.15 18-Jul-34	11.00	10.45	0.16
12.50 27-Mar-35	11.00	10.44	0.15
12.40 18-Mar-36	11.00	10.40	0.15
16.2499 18-Apr-37	11.00	10.43	0.15
9.80 24-Jul-45	11.50	10.34	0.30
14.80 26-Apr-49	11.26	10.82	0.06
12.98 27-Mar-50	11.22	10.72	0.02

Treasury Bills

The secondary market of Treasury Bills took a backseat in today?óÔé¼Ôäóstrading session, as all eyes were on the primary market auction. Offers wereseen across the NTB and OMO curves, but with no bid interests could be firmedup. Reflecting the uncertainty of the DMO?óÔé¼Ôäós auction, spreads widened on theaverage rising by c.36%bps on the average across the benchmark bills curves.

At the Primary Market, pressures from investors for higher interestrates bided proved too much for the DMO as it struggled to keep a handle onsingle-digit borrowing rates. Demand at the auction was weak, with a much widerrange of bids as investors were expectant the NTB rates will follow theprecedent set by the CBN at last week?óÔé¼Ôäós c438bps average rise in OMO stop rates.The DMO managed some of the pressure by moving more volumes to shorter-datedtenors and redeeming a portion of the 364-day maturing bills. The stop rateseventually closed higher by c.45bps, c.70bps and 200bps to close at 1.00%,2.00% and 4.00% for the 91-, 182- and 364-day tenors.

We expect a more volatile trading session tomorrow, as the market attemptsto price-in the effects of consecutive rate hikes at the last two primaryauctions.

Benchmark OMO Bills
Description	Bid (%)	Offer (%)	Day Change (%)
NGOMOB 0 03/02/21	7.00	0.03	0.00
NGOMOB 0 05/11/21	7.50	0.03	0.00
NGOMOB 0 06/08/21	8.25	0.04	0.00
NGOMOB 0 08/10/21	8.25	0.04	0.00
NGOMOB 0 09/07/21	9.00	0.04	0.00
NGOMOB 0 10/19/21	10.00	0.05	0.00
NGOMOB 0 11/02/21	10.50	0.05	0.00
NGOMOB 0 12/07/21	10.50	0.05	0.00
NGOMOB 0 01/13//22	10.50	0.05	0.00
Benchmark NT-Bills
Description	Bid (%)	Offer (%)	Day Change (%)
NIGTB 0 02/11/21	6.50	0.03	0.00
NIGTB 0 03/11/21	6.50	0.03	0.00
NIGTB 0 04/29/21	6.50	0.03	0.00
NIGTB 0 05/13/21	7.00	0.03	0.00
NIGTB 0 06/10/21	7.50	0.04	0.00
NIGTB 0 07/01/21	7.50	0.04	0.00
NIGTB 0 08/26/21	7.50	0.04	0.00
NIGTB 0 09/09/21	8.50	0.04	0.00
NIGTB 0 10/14/21	9.00	0.05	0.00
NIGTB 0 11/11/21	9.50	0.05	0.00
NIGTB 0 01/11/22	9.80	0.05	0.00

MoneyMarkets

Systemliquidity improved opening today, as the market opened at N486Bn net positive(c.71% higher D/D). OBB and OVN rates consequently crashed further by 350bps onthe average to close at 5.00% and 5.25% respectively.

Weexpect interbank rates to oscillate in tandem to the system liquidity tomorrow,with pressure expected from the weekly anticipated OMO auction.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	5.33	5.33
Overnight (O/N)	5.83	5.83

FXMarket

Tradedvolumes lower at the IEFX market remained stable D/D, with the Naira stilltrading above the N400.00/$ at the official windows (the first traded at theselevels in the official markets so far this year). The parallel marketstabilized a bit from the recent moves in rates, with cash and transfer ratesclosing unchanged at N473.50/$ and N489.50/$ respectively.

FX Market
	Current (N/$)	Previous (N/$)
CBN Spot	379.00	379.00
CBN SMIS	380.69	380.69
I&E FX Window	400.00	400.00
Cash Market	473.50	468.00
Transfer Market	489.00	489.00

Eurobonds

The NGERIA Sovereigns received a return of positiveflows in today?óÔé¼Ôäós session, as yields across the sovereign curve compressed byc.2bps on the day. The newly issued Egypt papers started its open trading on a positivenote, with prices improved by 0.75c on the average at the session?óÔé¼Ôäós opensimilar to the gains witnessed across most of the SSA Sovereigns Space.

The issuance of the new Ecobank Nigeria Limited dominated mostof the attention of the trading session of the NIGERIA Corps as mosttracked papers faced selling pressures most especially the related ETINL 2024spaper which saw its yield rise c.28bps at the close. The Ecobank issue washighly successful, with being oversubscribed by 3X, as the bank stuck to isplanned issuance amount of $300mio closed at 7.125% yield for the 5-year bond.This high unmet demand should push the bond to open on a positive note.

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