Somber Day in the Fixed Income Space as the MPC Maintains Rates across All Boards

Tuesday, March 24, 2020 / 9:27 PM / by Zedcrest Capital / Header Image Credit: LiteForex

 

FGN Bonds

The Bonds Markets continued on a quiet note, as activities
remained somber across the curve. With one eye on the potential outcome of the
MPC meeting, market players traded cautiously, especially on the long-end of
the curve. However, we saw some slight demand at the short- (2022s) to mid-end
(2028s) as investors seemed more comfortable at the head and belly of the bond
curve.

At the MPC meeting, the committee maintained the Monetary
Policy Rate (MPR) at 13.50%. It also retained the Cash Reserve Ratio (27.50%)
and Liquidity Ratio at 30%. The asymmetric corridor also remained unchanged at
+200/-500 bps around the MPR. The committee further reiterated that its decision
to retain controlling rates was informed by the need to observe the impact of the
invention plans, already in place to save the economy from the downing effect
of the COVID-19 pandemic.

We still expect the market players to tread cautiously, as
attention shifts to tomorrow’s bond PMA.







FGN Bonds 
Expectation – 25 March 2020

 

Tenor

Offer
(N’bn)

Expected
Stop Rate (%)

Previous
Stop Rate (%)

APR
2023

15.00

8.20-9.00

8.75

MAR
2035

15.00

10.30-11.00

10.70

APR
2050

20.00

12.00-12.50

12.15

 

















Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

 

14.50 15-Jul-21

7.86

5.47

(0.05)

 

16.39 27-Jan-22

9.13

6.42

(0.01)

 

12.75 27-Apr-23

11.95

10.79

0.58

 

14.20 14-Mar-24

13.35

11.09

0.15

 

13.53 23-Mar-25

13.11

11.01

0.27

 

12.50 22-Jan-26

12.99

12.26

0.00

 

16.29 17-Mar-27

13.21

12.36

(0.01)

 

13.98 23-Feb-28

13.20

12.55

(0.01)

 

14.55 26-Apr-29

13.20

12.49

(0.01)

 

12.15 18-Jul-34

13.20

12.45

(0.01)

 

12.40 18-Mar-36

13.20

12.67

(0.01)

 

16.2499 18-Apr-37

13.20

12.64

(0.01)

 

14.80 26-Apr-49

13.36

12.80

0.06

 

 

Treasury
Bills

The
Treasury Bills market opened on a somber note, as we noticed mainly client-driven
axes on OMO bills. The mid-end of the OMO curve (Sept/Oct) continued to see the
most traction, as it provided market players an equally attractive yield as the
long-tenured OMO bills but a shorter duration. We also saw some order-driven
sell-off by mostly offshore investors on the long-end. Yields expanded by an
average of c.45bps across the benchmark OMO curve.

The NTB
side traded on a flat note as we saw little to no interest across the NTB
curve. Yields remained stable D/D across the benchmark NTB curve.

We expect
to see more client-driven demand on the mid-end of the OMO curve, as yields
seem attractive to market players.























Benchmark
OMO Bills

Description

Bid (%)

Offer
(%)

Day
Change (%)

NGOMO 2-Apr-20

17.00

15.50

0.00

NGOMO 14-May-20

17.50

13.00

0.50

NGOMO 4-Jun-20

17.50

13.00

0.50

NGOMO 2-Jul-20

17.50

13.00

0.50

NGOMO 13-Aug-20

17.50

13.00

0.50

NGOMO 3-Sep-20

17.50

13.00

0.50

NGOMO 1-Oct-20

17.00

13.25

0.50

NGOMO 3-Nov-20

17.50

13.00

0.50

NGOMO 1-Dec-20

17.50

13.00

0.50

NGOMO 5-Jan-21

17.50

13.00

0.50

NGOMO 02-Feb-21

17.50

13.00

0.50

 

Benchmark
NTBills

Description

Bid (%)

Offer
(%)

Day
Change (%)

NIGTB 2-Apr-20

3.50

1.00

0.00

NIGTB 2-Jul-20

4.50

1.00

0.00

NIGTB 1-Oct-20

6.00

1.00

0.00

NIGTB 12-Nov-20

7.00

2.00

0.00

NIGTB 14-Jan-21

7.00

3.00

0.00

NIGTB 11-Feb-21

7.00

2.00

0.00

                                                                         


Money
Market

The Interbank market continued to be a takers
delight, with rates remaining depressed, as system liquidity still opened
buoyant (c.N307bn positive). OBB and OVN rates dipped by c.150bps to close at
4.83% and 5.25% respectively.

We expect rates to dip further in tomorrow’s
session, as we expect tranches of the approved FAAC money to flow in.

 

 

 






Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back
(OBB)

4.83

6.00

Overnight (O/N)

5.25

6.93

 

FX Market

At the interbank, the Naira/USD spot rate depreciated by N1
to close at N361.00/$, while the SMIS rates closed at N358.51/$. At the I&E
FX window, the Naira appreciated against the dollar by 22k to close at N380.53/$.

At the parallel market, cash and transfer rates were
unchanged at N396.00/$, and N410.00/$ respectively.









FX Market

Current (N/$)

Previous ( N/$)

CBN Spot

361.00

360.00

CBN SMIS

358.51

358.51

I&E FX Window

380.53

380.75

Cash Market

396.00

396.00

Transfer Market

410.00

410.00

 

Eurobond

Yields in the NGERIA Sovereign market,
recovered slightly D/D, as we saw demand across the curve. Despite Nigeria’s
government cut in crude oil prices to clear out the glut in cargoes, benchmark
oil prices improved D/D by c.6.97% to clear at $29.91 per barrel. Yields
compressed by c.35bps across the sovereign curve.

The NGERIA
Corps tickers traded on a quiet note, as yields remained relatively
unchanged D/D among most tracked papers, with only the ETINL 2024s having a
significant move, weakening by c.6.41% to close the day.

 

Proshare Nigeria Pvt. Ltd.

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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.