FX: CBN Steps Towards Rate Unification, Adjust Official Spot Rate on Its Website to N379

Culled—Proshare

August 7, 2020

By Zedcrest Capital 

Below are highlights of trading activities in the fixed income and forex market on  August 08, 2020.

FGN Bonds

The FGN bond market started trading today on a sluggish note but activity picked up by mid-day as local investors began to scramble for bonds, particularly the ‘auction bonds’ of 2026s, 2035s, and 2045s which settled at 7.00%, 9.55%, and 9.60% respectively. Spreads at the long-end of the curve (2049s and 2050s papers) opened pretty wide in the earlier hours at 10.30/9.90 but closed up with most of the trades settling around 10.00%. Consequently, yields compress on across the benchmark curve by c.98bps on the average of across the curve to close the week on a positive note.

We expect to see more activities in the market in the coming week, as demand is anticipated to continue to filter in at these levels against thin supply volumes.

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)  
16.39 27-Jan-22 5.00 2.80 (3.24)  
12.75 27-Apr-23 7.05 4.20 (1.48)  
14.20 14-Mar-24 7.10 4.50 (1.80)  
13.53 23-Mar-25 7.50 5.15 (1.45)  
12.50 22-Jan-26 8.00 6.15 0.30  
16.29 17-Mar-27 8.85 7.10 (0.77)  
13.98 23-Feb-28 8.75 7.40 (1.29)  
14.55 26-Apr-29 9.45 8.20 0.03  
12.15 18-Jul-34 10.05 9.05 (0.52)  
12.40 18-Mar-36 10.10 8.90 (0.54)  
16.2499 18-Apr-37 10.15 9.80 (0.57)  
14.80 26-Apr-49 10.08 9.75 (0.48)  

Treasury Bills

The OMO bills space woke from its previous muted note with few trades seen on longer-dated bills. May/June bills were in high demand today starting at 4.60% before trending downward and shedding around c.20bps before the bulls took a pause.

At the NTB space, we saw continued retail demand for July bills which traded around 3.00% levels.

Next week, we expect the treasury bills rates to remain steady at these levels. However, activities may improve slightly should the CBN float an OMO auction during the week.

Benchmark OMO Bills
Description Bid (%) Offer (%) Day Change (%)
NGOMO 8/13/2020 4.00 0.01 0.00
NGOMO 9/3/2020 4.50 0.01 0.00
NGOMO 10/1/2020 4.50 0.01 0.00
NGOMO 11/03/2020 5.00 0.01 0.00
NGOMO 12/01/2020 5.00 0.01 0.00
NGOMO 02/02/2021 6.00 1.00 0.00
NGOMOB 0 03/02/21 6.00 1.00 0.00
NGOMOB 0 03/02/21 6.00 1.00 0.00
NGOMOB 0 05/11/21 6.00 1.00 0.00
 

Benchmark NTBills

Description Bid (%) Offer (%) Day Change (%)
NIGTB 10/1/2020 2.50 0.01 0.00
NIGTB 11/12/2020 3.00 0.01 0.00
NIGTB 01/14/2021 3.00 0.10 0.00
NIGTB 02/11/2021 3.50 0.10 0.00
NIGTB 04/29/2021 3.50 0.10 0.00
NIGTB 05/13/21 4.00 0.10 0.00
NIGTB 06/10/21 4.00 0.10 0.00

Money Markets

Money market rates dropped further by c.157bps on the average during today’s trading session, largely supported positive system liquidity of c.N225.69BN with no funding pressures on local banks. OBB and OVN rates to close the week at 6.33% and 7.17% respectively.

We expect the market rates to revolve around the single-digit corridor for most of the coming week, while inching up slightly towards the weekend as participants seek funding for the bi-weekly retail intervention auction.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 6.33 8.00
Overnight (O/N) 7.17 8.64

FX Market

At the FX space, we saw movement at the cash and transfer market which depreciated by an average N1.50k as demand began to pick up amidst short supply consequently closing at N473/$ and N475/$ respectively. The I&E FX market also depreciated by 0.50K closing the week at N386/$.

In other news, the CBN finally updated the spot rate on their website from N361/$ to N379/$ in another step the Apex bank is taking towards the unification of its exchange rate.

FX Market
Current (N/$) Previous ( N/$)
CBN Spot 381.00 381.00
CBN SMIS 380.69 380.69
I&E FX Window 386.00 385.50
Cash Market 473.00 472.00
Transfer Market 475.00 473.00

 Eurobonds

At NGERIA Sovereign space, we saw slight retracement in bids as oil prices dropped slightly below $45/barrel. Although the market had a pretty quiet session, we saw yields compressed slightly by an average of c.4bps across the curve.

The NGERIA Corps also had a quiet session, while the only movement seen amongst the tracked papers was on UBA 2022s and SEPPLN 2022s which strengthened by c.5bps and c.9bps respectively.

Proshare Nigeria Pvt. Ltd.

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