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Debt Securities

Daily update on Treasury Bills, Bonds, Forex, oil price and more

Daily performance of major economic indicators and highlights from tradings sessions and key statistics such as Treasury Bills, bonds, FX rates, inflation, oil price.

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Nigerian stock exchange, All share index, Nigerian bourse, Investors, Bulls gather momentum ASI up 0.48%, gained N55.3 billion, Dangote ,MTN & Gtbank hit a home run as Nigeria’s bourse continues bullish momentum

Daily performance of major economic indicators and highlights from tradings sessions and key statistics such as Treasury Bills, bonds, forex, inflation, oil price.

  • FGN Bond auction undersubscribed by 11% amidst weak investor appetite
  • Headline year-on-year (YoY) Inflation falls to 11.26% in October, compared to 11.28% in September

KEY INDICATORS

Bonds

The FGN bond market was scantily traded as market participants focused on the outcome of the Bond auction floated by the DMO today. While spreads in the market adjusted closer amidst bearish sentiments, yields consequently ticked marginally higher by c.1bp on the average across the curve.

The FGN Bond Auction conducted by the DMO today was undersubscribed, with an 89% bid to cover, showing weak investor appetite towards the auction. The DMO was only able to raise a total of c.N39bn out of the N115bn on offer as investors demanded for higher yields. Stop rates ticked higher than the previous auction to close at 15.20% (20bps higher) for the 5-yr, 15.50% (35bps higher) for the 7-yr and 15.83% (51bps higher) for the 10-year papers.

We expect market to remain risk-off on bonds in the interim, as investors look to fill demands for higher yields at the next auction which comes up in 3-weekstime.

Treasury Bills

Trading activity picked up in the T-bills market after the break, albeit with a bearish bias. We witnessed sell-offs from local and foreign participants along the mid- to long-end of the T-bill curve, as the final MPC meeting of the year commenced today. Yields consequently expanded by c.8bps across the T-bills curve, with the 03-Oct-2019 maturity hitting an intraday high of 14.80%.

With supply expected via an OMO auction tomorrow, we maintain our expectations for yields to trend upwards for the rest of the week.

Money Market

Money Market rates moderated a little today as there were no major inflows/outflows hitting the banking system. The OBB and OVN dropped by c.0.33bps to close at 9.67% and 10.67% respectively, as system liquidity remained stable at c.N250bn.

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We expect rates to further drop tomorrow due to inflows of c.N408bn coming from OMO T-bills maturities. The CBN is however expected to mop up excess liquidity from the system through the sale of OMO T-bills to moderate inflationary pressures.

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.75/$ (spot) and dropped by c.N1.04k to close at N360.85/$ (SMIS). At the I&E FX window a total of $348.02bn was traded in 220 deals, with rates ranging between N360.00/$ – N365.00/$. The NAFEX closing rate appreciated by c.0.16% to N364.26/$ from N363.69/$ previously.

Stanbic 728 x 90

At the parallel market segment, the cash and transfer rates both remained unchanged to close N364.00/$ and N366.50/$ respectively.

Eurobonds

The NGERIA Sovereigns continued to underperform amongst its Sub-Saharan Africa peers due to the recent bearish oil market and general election sentiment. We saw little interest on the NGERIA 27s and 49s as flows reduced ahead of the U.S. Thanksgiving bank holiday set for tomorrow.

Similarly, we witnessed little interest across major NGERIA Corps tickers. The DIAMBK 19s bond holders were also credited coupon today. We believe this should spur more buying interest going forward as the yield on the bond remains the most attractive amongst its peers.


Disclaimer:

Whilst proper and reasonable care has been taken in the preparation and accuracy of the facts and figures presented in this report, no responsibility or liability is accepted by Zedcrest Capital or its employees for any error, omission or opinion expressed herein. This report is not an investment research or a research recommendation and should not be regarded as such. The information provided herein is by no means intended to provide a sufficient basis on which to make an investment decision.

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Debt Securities

DMO to auction N150 billion bonds for April on behalf of FG

It also states that the interest is payable semi-annually with the redemption expected to be in bullet payment on the maturity date.

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The Debt Management Office (DMO) has announced the offer of N150 billion bonds for subscription by auction in the month of April on behalf of the Federal Government.

A breakdown of the bonds shows that a 10-year reopening bond is to be offered at the rate of 16.2884% with a maturity date in March 2027; a 15- year reopening bond will be offered at 12.5% with a maturity date in March 2035; and the third and longest bond which is a 25-year reopening bond will be offered at 9.8% and mature in July 2045.

This disclosure is contained in a circular issued by the DMO on April 14, 2021, and can be seen on its website.

The circular states that the bonds which would be auctioned on April 21, 2021, have a settlement date of April 23, 2021, adding that the unit of sale is N1,000 per unit subject to a minimum subscription of N50,000 and in multiples of N1,000 thereafter.

It also states that the interest is payable semi-annually with the redemption expected to be in bullet payment on the maturity date.

READ: OPEC, NSE, MTN, other developments and how they affect your pocket

In case you missed it

  • The DMO had earlier disclosed that the Federal Government’s bonds for March worth N150bn which were auctioned were oversubscribed by N183.48bn.
  • The total subscription received from investors for the bonds was N333.48bn comprising N65.25bn for 16.2884% FGN March 2027 bonds; N110.19bn for 12.5% FGN March 2035 bonds; and N158.04bn for 9.8% FGN July 2045 bonds.
  • The auction result added that out of 82, 125 and 215 total bids for the tenures, 48, 88 and 176 were successful.
  • It stated that a total of N262.1bn was allotted, comprising of N44.01bn, N86.29bn and N131.80bn respectively.

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Debt Securities

The Nigerian treasury bills hits 9%

This increase is supposed to have a substantial impact on the Nigerian Stock exchange market.

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Nigerian Treasury Bills falls to 3.05% per annum, Implications of the new CBN stance on treasury bill sale to individuals

According to the primary market auction result, Nigerian Treasury Bills Yield held the 91-day and 182-day constant at 2.00% and 3.50% respectively.

The 364-days Bill increased by 100 base point to 9.00% from its previous 8.00% interest. This increase is supposed to have a substantial impact on the Nigerian Stock exchange market.

READ: Why interest rates on treasury bills, bonds crashed

The 91-day and 182-day bills have remained relatively constant for the 4th consecutive auction. This increase in the 364-days Treasury Bill Yield may be seen to have a negative correlation in the stock exchange market as investors sell off their volatile positions and buy risk-free assets like treasury bills.

Some analysts believe that the increase is in direct response to inflationary concerns as the CBN attempts to curb inflation without detouring growth.

READ: CBN introduces “Special Bills” as part of efforts to control money supply in the economy

What this means

  • An increase in Treasury Bill Yield may cause a drop in the Stock exchange market as analysts expect selloffs to continue towards the end of the week.
  • Persistent inflation concerns may lead the CBN to take more aggressive steps and increase the treasury bills rates even higher.
  • The banking sector is expected to benefit from the increase as they shift their focus from stock to fixed income.
  • Analysts expect that a higher yield trend will boost foreign direct investment, which is aligned with the CBN policy of increasing foreign inflows.
  • Some market participators see the increase as a good sign. However, the consensus was held for a steady slow increase rather than an eccentric rate change.

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