August 21, 2019
by Zedcrest Capital
Results from the recent FGN Bond auction by DMO showed that the auction was significantly undersubscribed, with total subscriptions of only N95bn of the N145bn offered. The DMO also undersold the total subscriptions at 0.14X bid to cover, with a total sale of N13.51bn marking its lowest auction sale since December 2018. The Auction yields consequently cleared c.63bps higher from their previous levels.
Bonds
The FGN Bond market traded on a relatively flat note, with yields inching higher by c.5bps on the day, as market players awaited results from the FGN Bond auction.
We expect the market to remain in a bearish mood, despite the significantly low volume of sales by the
DMO.
| FGN Bond Auction Result | ||||
| Maturity | Rate (%) | Offer (₦‘bn) | Sub (₦‘bn) | Sale (₦’bn) |
| Apr-23 | 14.20 | 40.00 | 10.41 | 1.05 |
| Apr-29 | 14.19 | 50.00 | 37.47 | 2.16 |
| Apr-49 | 14.59 | 55.00 | 47.21 | 10.30 |
Source: Zedcrest Research
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14.50 15-Jul-21 | 14.47 | 14.07 | 0.00 |
| 16.39 27-Jan-22 | 14.68 | 14.36 | 0.07 |
| 12.75 27-Apr-23 | 14.35 | 14.16 | (0.07) |
| 14.20 14-Mar-24 | 14.35 | 13.74 | 0.17 |
| 13.53 23-Mar-25 | 14.59 | 13.88 | 0.03 |
| 12.50 22-Jan-26 | 14.40 | 14.09 | 0.03 |
| 16.29 17-Mar-27 | 14.39 | 14.17 | 0.09 |
| 13.98 23-Feb-28 | 14.61 | 14.32 | 0.11 |
| 12.15 18-Jul-34 | 14.64 | 14.16 | 0.14 |
| 12.40 18-Mar-36 | 14.55 | 14.23 | (0.12) |
| 16.2499 18-Apr-37 | 14.72 | 14.35 | 0.08 |
| 14.80 26-Apr-49 | 14.71 | 14.50 | 0.07 |
Source: Zedcrest Dealing Desk
Treasury Bills
Yields in the T-Bills market moderated further in todays session, with some real money demand from local funds on some of the high yielding T-bills mostly on the short and mid end of the curve. We however witnessed persistent selling interests from offshore clients on those tenors.
We expect T-bill yields to remain relatively stable at current levels, with c.N92bn in OMO T-bills maturing tomorrow.
| Benchmark Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 12-Sep-19 | 15.00 | 13.00 | 0.00 |
| 3-Oct-19 | 15.00 | 14.00 | 0.00 |
| 14-Nov-19 | 15.00 | 14.00 | 0.00 |
| 5-Dec-19 | 14.80 | 14.35 | (0.20) |
| 2-Jan-20 | 14.75 | 14.00 | (0.20) |
| 6-Feb-20 | 14.75 | 14.25 | (0.15) |
| 19-Mar-20 | 14.70 | 13.00 | (0.05) |
| 2-Apr-20 | 14.50 | 14.00 | 0.00 |
| 14-May-20 | 14.00 | 12.50 | (0.25) |
| 04-Jun-20 | 14.00 | 12.50 | 0.00 |
| 02-Jul-20 | 14.00 | 12.50 | 0.00 |
| 13-Aug-20 | 13.50 | 12.50 | (0.50) |
Source: Zedcrest Dealing Desk
Money Market
Rates in the money market inched higher by c.5pct, as system liquidity declined further to c.N367bn negative opening the day. The OBB and OVN rates consequently ended the session at 22.86% and 25.36%.
We expect rates to remain elevated in the near term, due to the depressed system liquidity levels.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 22.86 | 18.57 |
| Overnight (O/N) | 25.36 | 20.36 |
Source: FMDQ, Zedcrest
FX Market
At the interbank, the Naira/USD spot and SMIS rates remained stable at N360.95/$ and N357.96/$. The Naira appreciated at the I&E window, by 91k to close at N362.77/$. At the parallel market, the cash and transfer rates remained stable at N358.80/$ and N363.00/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.95 | 306.95 |
| CBN SMIS | 357.96 | 357.96 |
| I&E FX Window | 362.77 | 363.68 |
| Cash Market | 358.80 | 358.50 |
| Transfer Market | 363.00 | 363.00 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Sovereigns rebounded in todays session, with yields lower by c.6bps on the day, as oil prices held steady, following a reported crude draw by the EIA.
The NGERIA corps traded weaker, with increased selling interests on most tickers.
