Fixed Income Daily Report: Treasury Bills, Bonds, and more

PMA Stop Rates Clear c.40bps lower following c.530% Oversubscription

***US Fed Sees No 2019 Hikes, Plans September End to Asset Drawdown***

Key Indicators

Markets’ trends showing Good and Bad signs for Nigeria’s economy

June 9, 2020

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Mixed trends trail Nigerian markets

June 7, 2020

Bonds

The FGN Bond market tilted slightly bearish as the DMO released its bond offer circular for the month, indicating its intention to offer N100bn of the 2023, 2025 and 2028 bonds at an auction scheduled to hold on the 27th of the month.

Due to expectations for renewed supply of bonds and the slowdown in demand interests in recent sessions, we expect yields to trend slightly higher towards the auction, with the most uptick expected on the shorter end of the curve where supply is heaviest.

Treasury Bills

The T-bills market turned bullish in today’s session, with yields compressing by c.10bps on average, as market players cherry-picked on relatively attractive yields in the secondary market due to expectations for a further compression in rates at the NTB auction by the CBN.

Despite offering only c.N49b T-bills, the CBN received subcriptions totalling c.N259bn at today’s NTB auction, with c.86% of the total demand skewed towards the 364-day maturity. Stop rates consequntly fell by c.40bps from their levels at the previous auction, down to 10.30%, 12.20% and 12.345% on the 91, 182 and 364-day bills respectively.

We expect the market to remain slightly bullish tomorrow, whilst the CBN is expected to conduct an OMO auction to counter c.N121bn OMO maturities.

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N305.90/$ (Spot) and N356.92/$ (SMIS). The NAFEX closing rate in the I&E weakened slightly by 0.07% to N360.40/$, while the cash and transfer rates at the parallel market remained unchanged at N357.80/$ and N364.00/$ respectively.

Eurobonds

The NGERIA Sovereigns traded on a slightly bearish note as market players awaited details from the US FOMC meeting. Yields consequently ended the session c.3bps higher on the day. Given the re-affirmation of a dovish stance by the US FED, we expect a renewed bullish trend in the market tomorrow.

In the NGERIA Corps, we witnessed renewed interests on the UBANL and FIDBAN 22