Lagos, NG • GMT +1
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Monday, September 21, 2020 / 7:32 PM / By Zedcrest Capital/ Header Image Credit: Ripples Nigeria
It was aquiet start to the week in the FGN Bonds market as market participants pintheir focus on the bi-monthly MPC meeting as well as the monthly FGN Bondauction slated for the week. Despite the generally quiet session, we stillnoted some pockets of the demand at the short- (2023s), mid- (2025s and 2027s),and long-end (2034s, 2049s, and 2050s) at close to offer levels. Consequently,yields compressed by c.5bps on the average across the benchmark bond curve.
We expectthe market to remain calm opening tomorrow as well ahead of the MPC Communique.Clients are still expected to cherry-pick across the curve as ahead of thecontinued inflow of FGN Bond coupon payments (c.N24BN expected this week).
| Benchmark FGN Bonds | ||||
| Description | Bid (%) | Offer (%) | Day Change (%) |
|
| 16.39 27-Jan-22 | 5.00 | 3.10 | 0.00 |
|
| 12.75 27-Apr-23 | 5.00 | 3.82 | (0.40) |
|
| 14.20 14-Mar-24 | 5.00 | 3.75 | (0.25) |
|
| 13.53 23-Mar-25 | 5.55 | 4.60 | 0.00 |
|
| 12.50 22-Jan-26 | 6.60 | 6.30 | 0.00 |
|
| 16.29 17-Mar-27 | 7.70 | 7.40 | 0.00 |
|
| 13.98 23-Feb-28 | 7.90 | 7.70 | 0.05 |
|
| 14.55 26-Apr-29 | 8.18 | 7.90 | 0.00 |
|
| 12.15 18-Jul-34 | 9.80 | 9.55 | 0.00 |
|
| 12.40 18-Mar-36 | 9.90 | 9.60 | 0.00 |
|
| 16.2499 18-Apr-37 | 9.90 | 9.75 | 0.00 |
|
| 14.80 26-Apr-49 | 9.98 | 9.90 | 0.00 |
|
Treasury Bills
The huntfor yield by local banks continued today, as rates continued to drop acrossmost traded securities especially at the long-end of the OMO curve. Long-datedpapers (August maturities) traded within the 2.70-2.80 range as supply at thatend remains thin. Consequently, rates dropped by c.19bps on the benchmark OMOcurve.
We expectthe market to remain bullish supported by current system liquidity levels. WithOMO maturities of c.N300BN expected later this week, rates could crash as lowas mid-2% levels as the bullish train continues.
| Benchmark OMO Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NGOMO 10/1/2020 | 3.00 | 0.01 | 0.00 |
| NGOMO 11/03/2020 | 3.00 | 0.01 | 0.00 |
| NGOMO 12/01/2020 | 3.00 | 0.01 | 0.00 |
| NGOMO 01/05/2021 | 4.00 | 0.01 | (1.00) |
| NGOMO 02/02/2021 | 4.00 | 0.01 | (1.00) |
| NGOMO 03/02/21 | 5.00 | 0.01 | 0.00 |
| NGOMO 05/11/21 | 5.00 | 0.01 | 0.00 |
| NGOMO 06/08/21 | 5.00 | 0.01 | 0.00 |
| NGOMO 08/10/21 | 5.00 | 0.01 | 0.00 |
| Benchmark NTBills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| NIGTB 10/1/2020 | 2.00 | 0.01 | 0.00 |
| NIGTB 11/12/2020 | 2.00 | 0.01 | 0.00 |
| NIGTB 12/31/2020 | 2.00 | 0.01 | 0.00 |
| NIGTB 01/14/2021 | 3.00 | 0.01 | (0.50) |
| NIGTB 02/11/2021 | 3.00 | 0.01 | (0.50) |
| NIGTB 04/29/2021 | 4.00 | 0.01 | 0.50 |
| NIGTB 05/13/21 | 4.00 | 0.01 | 0.00 |
| NIGTB 06/10/21 | 4.00 | 0.01 | 0.00 |
| NIGTB 07/01/21 | 4.00 | 0.01 | 0.00 |
| NIGTB 08/26/21 | 4.00 | 0.01 | 0.00 |
Money Markets
Interbank rates remained low,supported by excess system liquidity levels. The markets opened c.N533BN, 146%higher than the previous session, pushing rates down to close at 1.00% and2.00% for OBB and OVN rates respectively.
We expect rates to remain lowthis week as FGN Bond coupons of c.N24BN and OMO maturities of N300bn droplater in the week.
| Money Market Rates | ||
| | Current (%) | Previous (%) |
| Open Buy Back (OBB) | 1.00 | 2.00 |
| Overnight (O/N) | 2.00 | 3.00 |
FX Market
It was anactive day for the Apex regulator as another list of 71 additional companiesunder investigation by the CBN came out today. This development follows 2 ofsuch investigations launched by the CBN in August earlier this year.
Despitethis development, the lack of supply again hit the FX markets today as ratesweakened again in the parallel market. Cash and transfer rates lost an averageof N1.50k to close higher at N465.00/$ and N478.00/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 379.00 | 379.00 |
| CBN SMIS | 380.69 | 380.69 |
| I&E FX Window | 386.00 | 386.00 |
| Cash Market | 465.00 | 464.00 |
| Transfer Market | 478.00 | 476.00 |
Eurobonds
It was a blood-red session across the Sub-SaharanAfrican Eurobond space, with sell-offs seen on most major names including the NIGERIASovereigns. This weakness comes as investors worry about COVID-19 surgingin Europe again and dropping oil prices. Yields expanded by c.30bps across the sovereign curve in a generallyweak session.
The NIGERIA Corporate papers have so far beenspared of the onslaught, save for the FIDBAN 2022s which lost c.26bps on itsclosing yield.
We expect the sell-off to expand to other names, asinvestors look to protect their portfolios in the light of these weaksentiments.
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