DMO Calls the Market’s Bluff, Redeeming Over 65% Of the Amount Offered on the 364days Bills

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The bearishness in the FGN bond space continued today, as a flurry of sellers cut across the benchmark curve. The 2027s, 2029s, and 2049s were the major losers in today’s market, as yields jumped by over 80bps compared to the previous day’s offered levels.

Few trades printed on the 2029s bond around 7.80% levels at the early hours of trading, although by mid-day, market attention shifted to the curve’s tail as offers became more attractive for some market participants.

Although a chunk of market bids stood above 9% levels for the 2049s paper, we saw few trades print around 8.95% towards the close of trading. On the other hand, the 2050s bond was initially offered at 8.30% and then climbed by an additional 30bps, but still failed to trigger any trades as bids stood far at 9.05% levels.

Subsequently, yields expanded by an additional c.5bps on the average across the benchmark bond curve compared to yesterday’s closing.

We expect market bearishness to persist tomorrow, with few opportunistic bulls who would take advantage of the market levels and cherry-pick on selected bonds of their choice.

Treasury Bills

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The treasury bills market opened trading with a quick rush for short-dated bills, especially the 09th March bills which traded around 0.17% levels.  This was however short-lived as the market returned to a snooze, with loads of offers seen for Jun. 2020 to Jan. 2021 bills. The bid/ask spread on the longest-dated OMO bill initially opened 60bps apart, tightening slightly to close the day at 3.15%/2.20%.

At the Primary Market Auction (PMA), the DMO rolled over a total of c. N107.22bn across three tenors, approximately 46.14% of the amount offered. Although they redistributed their allotment on the three tenors, over 65% was repaid on the 1yr paper as they resisted the urge to issue bills at high levels.

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Stop rates closed higher by an average of c.418bps across the three tenors, with a bid-to-cover ratio of 2.92X for a 1-year tenor, which attracted most market bids.

We expect improved demand for NTBs papers in tomorrow’s trading session, as local investors look to fill-in lost bids from today’s PMA.

Money Markets

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Interbank rates dropped by an average of 150bps compared to yesterday’s levels, as the market opened at over N440BN positive. Subsequently, OBB and OVN rates closed the day at 1.50% and 2.00%, respectively.

We expect a further drop in rates tomorrow since we don’t foresee any significant outflow in the interbank market that would put additional pressure on funding regular market activities.

FX Market

Transaction volume decreased by 52% D/D as a total of over $17m passed through the I &E FX window, the lowest volume seen in the past couple of months as the supply of FX continue to dwindle in the market. Despite this, its rates appreciated dropping slightly by 0.15%, while most banks are still actively bided within the range of N383/1$ and N410/1$.

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However, all other market segments remained unchanged, with the cash and transfer market closing at N473/$1 and N484/$1, respectively.

Eurobonds

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The NIGERIA Sovereign tickers retraced further as more actions from profit-taking continue to weaken yield across the curve.  We noted better offers across the sovereign curve, most especially in the mid-and long-dated maturities, which was met with less aggressive bids, consequently causing yields to expand by an average of c.15bps across the sovereign curve.

Like the sovereign papers, most of the tracked papers for the NIGERIA Corps weakened, especially for the SEPLLN 2023s papers, which expanded by +c.40bps D/D.

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