Bump In Oil Price Ahead of OPEC Meeting Pushes Further Bullish Sentiments Across Markets

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FGN Bonds

Yields continued to plummet in today’s session, with consistent demand seen from local investors across the bond curve. Demand was most skewed to the belly of the curve, with the 2027s maturity the most traded as demand swallowed the improved offers seen on that maturity. At the long-end of the curve, a dearth of supply saw bids dropped by c.21bps on the average at the segment alone. Consequently, yields compressed further by c.18bps on the average across the benchmark bond curve, meaning yields have tanked cumulatively by c.52bps this week alone.

We maintain our expectation for this locally-driven demand to persist in the near-term. In the wake of moves by the FG to cut its budgetary spending and increasing borrowing as a result of the COVID-19 pandemic, we expect the DMO to revise its borrowing calendar for the quarter should the FG’s plans get the necessary approvals in place and thus adopt a more cautious approach mid-term.

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)  
14.50 15-Jul-21 6.07 5.55 0.04  
16.39 27-Jan-22 6.71 5.11 (0.61)  
12.75 27-Apr-23 10.01 8.91 (0.20)  
14.20 14-Mar-24 10.68 9.38 (0.01)  
13.53 23-Mar-25 12.15 10.61 0.13  
12.50 22-Jan-26 12.58 11.52 0.03  
16.29 17-Mar-27 12.34 11.95 (0.15)  
13.98 23-Feb-28 12.26 11.93 (0.19)  
14.55 26-Apr-29 12.31 12.00 (0.17)  
12.15 18-Jul-34 12.45 11.99 (0.15)  
12.40 18-Mar-36 12.54 11.89 (0.38)  
16.2499 18-Apr-37 12.64 12.23 (0.24)  
14.80 26-Apr-49 12.65 12.48 (0.06)  

 

Treasury Bills

It was another consecutive day of bullish trading of OMO bills today, as system liquidity remains buoyant. Rates dropped another c20bps across the benchmark OMO curve as banks remained heavy buyers for most offered maturities. At the long-end, rates continue to drop and face another resistance level as offers dropped as low as 11.00% in today’s session.

Bids also improved for NTBs today, especially for short-dated papers as demand from local retail clients continued to filter into the market. Consequently, rates dropped by c.5bps across the benchmark NTB curve.

With tomorrow’s session the last of the week ahead of a long holiday weekend, we maintain expectations sustained demand to close the week. There remains an outside chance of an OMO auction by the CBN to manage excess liquidity as well.

Benchmark OMO Bills
Description Bid (%) Offer (%) Day Change (%)
NGOM 5/14/2020 12.25 9.00 (0.25)
NGOM 6/4/2020 12.25 9.00 (0.25)
NGOM 7/2/2020 12.35 9.00 (0.15)
NGOM 8/13/2020 12.50 11.00 0.70
NGOM 9/3/2020 12.50 11.20 (0.50)
NGOM 10/1/2020 12.75 10.00 (0.25)
NGOM 11/03/2020 12.50 11.00 (0.50)
NGOM 12/01/2020 12.75 11.00 (0.25)
NGOM 01/05/2021 12.75 11.00 (0.25)
NGOM 02/02/2021 12.70 10.00 (0.30)
NGOM 03/02/21 12.75 10.00 (0.25)
Benchmark NTBills
Description Bid (%) Offer (%) Day Change (%)
NIGTB 2-Jul-20 2.15 1.00 (0.05)
NIGTB 1-Oct-20 3.20 1.00 0.00
NIGTB 12-Nov-20 3.80 1.00 (0.20)
NIGTB 14-Jan-21 4.00 2.00 0.00
NIGTB 11-Feb-21 4.00 1.50 0.00

Money Market

The Interbank market continued to be a takers delight, with rates remaining depressed, as system liquidity still opened buoyant (c.N460bn positive). OBB and OVN rates dipped by c.67bps to close at 2.83% and 3.17% respectively

With OMO maturities expected tomorrow, we expect the CBN to float an OMO auction to manage the high liquidity levels. Money market rates are expected to oscillate in tandem with liquidity levels in tomorrow’s session.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 2.83 3.50
Overnight (O/N) 3.17 3.83

 

FX Market

Traded volumes at the I&E FX window picked up in today’s session, with the exchange hitting intraday highs of N401.45/$. Despite this, the I&E FX close, CBN Spot and SMIS rates all remained unchanged D/D.

The Naira ploughed back some gains at the parallel market, with both the cash and transfer rates strengthening by N1.00 and N3.00 to close at N415.00/$ and N430.00/$ respectively.

FX Market
Current (N/$) Previous ( N/$)
CBN Spot  361.00  361.00
CBN SMIS  380.69  358.51
I&E FX Window  384.83  383.00
Cash Market  415.00  416.00
Transfer Market  430.00  433.00

Eurobond

Global oil prices spiked today after OPEC’s President stated the expected OPEC+ cuts could reach up to 10 million barrels per day, which fueled another bullish rally for the NGERIA Sovereigns as well as other oil-related state papers. Yields dropped further by c.36bps on the average across the sovereign curve consolidating the previous day’s gains, ahead of the OPEC+ virtual meeting expected to hold tomorrow.

The NGERIA Corps tickers traded on a quieter note, as yields remained relatively unchanged D/D among most tracked papers, with only the UBANL 2022s having a significant move, weakening by c.4bps to close the day.

 

Source: https://www.proshareng.com/news/%20Bonds%20&%20Fixed%20Income/Bump-In-Oil-Price-Ahead-of-OPEC-Meeting-Pushes-Further-Bullish-Sentiments-Across-Markets/50365

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