Treasury Market Opens Bearish as Market Players React to Higher CBN OMO Rate – Proshare Nigeria Limited

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Treasury Market Opens Bearish as Market Players React to Higher CBN OMO Rate – Proshare Nigeria Limited

Monday, September 02, 2019 05:30PM
/ Zedcrest Capital / Header Image Credit: Money Marketing


The T-bills market
traded on a bearish note today, with yields trending higher by c.30bps on the
day. We witnessed the most selling interests on the Short end of the curve,
following a further liquidity squeeze from a Wholesale FX sale by the CBN.

Below are highlights
of trading activities in the fixed income and forex market today.

Bonds

The FGN Bond market
opened the month on a firmly bearish note, with yields trending higher by
c.14bps, as market players reacted to the hike in the 1yr OMO rate by the CBN
to 13.50% (15.60% yield), which weakened bid prices further, especially on the
short end of the curve.

We expect sentiments
to remain weak within the bond market due to expectations for a further uptrend
in short term rates.

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.56

13.90

0.28

16.39 27-Jan-22

14.58

14.09

0.24

12.75 27-Apr-23

14.62

14.50

0.32

14.20 14-Mar-24

14.35

13.89

0.15

13.53 23-Mar-25

14.38

13.79

0.17

12.50 22-Jan-26

14.41

14.07

0.11

16.29 17-Mar-27

14.31

14.14

0.11

13.98 23-Feb-28

14.35

14.13

0.05

12.15 18-Jul-34

14.70

14.40

0.05

12.40 18-Mar-36

14.73

14.40

0.06

16.2499 18-Apr-37

14.74

14.39

0.10

14.80 26-Apr-49

14.73

14.50

0.06




Source: Zedcrest Dealing Desk
 

Treasury Bills

The T-bills market
traded on a bearish note, with yields trending higher by c.30bps on the day. We
expect yields to remain pressured across the curve, as market players
anticipate a renewed OMO auction by the CBN later in the week.


Benchmark Treasury
Bills

Description

Bid (%)

Offer (%)

Day Change (%)

12-Sep-19

13.50

12.75

0.15

3-Oct-19

13.25

12.75

0.15

14-Nov-19

13.50

12.50

0.50

5-Dec-19

13.75

12.60

0.75

2-Jan-20

13.85

13.50

0.35

6-Feb-20

13.90

13.40

0.50

19-Mar-20

14.00

13.50

0.20

2-Apr-20

13.95

13.30

0.25

14-May-20

14.00

13.25

0.35

04-Jun-20

13.95

12.80

0.20

02-Jul-20

13.95

12.80

0.25

13-Aug-20

14.00

13.00

0.25

Source: Zedcrest
Dealing Desk

Money Market

Rates in
the money market remained relatively stable as system liquidity was sustained
in positive territory at c.N80bn est. The OBB and OVN rates consequently ended
the session at 8.86% and 9.86% respectively.


We expect
rates to remain relatively stable tomorrow, as there are no significant funding
pressures anticipated.

Money Market Rates

Current (%)

Previous (%)

Open Buy Back (OBB)

8.86

9.29

Overnight (O/N)

9.86

10.50

Source: FMDQ,
Zedcrest
 

FX Market

At the
interbank, the Naira/USD spot rate appreciated by 5k to N306.95/$, while the
SMIS rate remained stable at N358.04/$. The Naira appreciated at the I&E
window by 20k to close at N362.73/$. At the parallel market, the cash and
transfer rates appreciated to N357.70/$ and N362.50/$ respectively.


FX Market

Current (N/$)

Previous  

(N/$)

CBN Spot

306.95

307.00

CBN SMIS

358.04

358.04

I&E FX Window

362.73

362.93

Cash Market

357.70

359.00

Transfer Market

362.50

363.00

Source: CBN, FMDQ,
REXEL BDC

Eurobonds

The NGERIA
Sovereigns
traded on a relatively flat note, with yields marginally lower
by 1bp on the day.

In the NGERIA
corps
, we witnessed some buying interest in the UBANL 22 and ETINL 24.

Related
News

1.       Bearish
Sentiments Halt as Improved Demand from Local Investors Pushes Average Yield
Down to 13.8%

2.      Fixed Income
Monitor – A Positive Sentiment Returns In The Market

3.      September 2019
FGN Savings Bonds Offer for Subscription

4.      Bond Yields
Trend Higher as CBN Floats Further OMO Auction

5.      NTB Auction
Oversubscribed by 67%, as Stop Rates Clear 80bps Higher

6.      Treasury Bill
Auction Schedule For August 28th, 2019

7.      Average Money
Market Rate Dropped Marginally By 0.53% To Settle At 18.25% From 18.79%

8.     Bearish Momentum
Sustained as Average T-Bills Yield Advanced 130bps to 15.2%

9.      Total
Subscription For August 2019 FGN Bond Auction Put At N64.71bn

10.  Escalating Trade
Tensions to Weigh on Domestic Fixed Income Yields

11.   Summary of FGN
Bond Auction Results For August 2019

12.  DMO Records
Lowest FGN Bond Auction Sale in 8-Months



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