ZOCK CAPITAL AND INVESTMENT LLC MARKET UPDATE AS AT 14TH JULY 2021
Foreign exchange Market
At the I&E FX market, Naira appreciated by 0.13 % as the dollar was quoted at 411.22 as against the last close of N411.75. Most participants maintained bids between 400.00 and 412.50 per dollar.
The external reserve position continues to deplete despite crude oil price rally at the global crude oil market.
FIXED INCOME SECURITIES AND MONEY MARKET UPDATE
SECONDARY MARKET
The treasury bills secondary market closed on a negative note with average yield across the curve increasing by 17 bps to close at 7.03 % from 6.86 % on the previous day. Average yields across mid and long-term maturities expanded by 36 bps and 19 bps, respectively. However, the average yield across the short-term maturities closed flat at 4.58 %. Yields on 10 bills advanced with the 17-Mar-22 maturity bill recording the highest yield increase of 48 bps.
OMO BILLS
The OMO bills market witness some buying spree across short and mid maturities falling by 48 bps and 26 bps. Average yield across the curve declined by 23 bps to close at 9.53 % as against the last close of 9.76 %. However, the average yield across the long-term maturities closed flat at 10.17 %. Yields on 10-Aug-21 maturity bill recorded the highest yield decline of 78 bps, while yields on 9 bills remained unchanged.
PRIMARY MARKET AUCTION
The CBN held its scheduled Primary Market Auction today, selling treasury bills worth #150.00 billion across the 91 day (#5.24 billion), 182 day (#7.46 billion), and 364 day (#137.30 billion) tenors.
The stop rates for the 91day and 182day remained unchanged at 2.50 % and 3.50 % while 364 day tenor cleared lower at 8.67 % as against 9.64% at the previous auction. The auction was oversubscribed by 285 %.However, the direction of rates continues to be influenced by strong investor subscription and the need to minimise the Federal Government borrowing cost.
TREASURY BILLS PRIMARY MARKET AUCTION (PMA).
MONEY MARKET
The Overnight rate decreased by 4.50 % to close at 14.50 % as against the last close of 19.00 % , and the Open Buy Back rate also decreased by 4.50 % to close at 14% compared to 18.50 % on the previous day trading session.
INVEST IN FGN MONTHLY BOND AUCTION FOR JULY 2021
The Central Bank of Nigeria on the authority of The Debt Management Office on behalf of the Federal Government Of Nigeria Offers for Subscription by Auction and is authorized to receive applications for the following;
- N50,000,000,000 – 13.98% FGN FEB 2028 (10-Yr Re-opening)
- N50,000,000,000 – 12.40% FGN MAR 2036 (20-Yr Re-opening)
- N50,000,000,000 – 12.98% FGN MAR 2050 (30-Yr Re-opening)
Auction Date: July 19, 2021
Settlement Date: July 23, 2021
PREVIOUS FGN BOND PMA AUCTION RESULT
FGN bonds secondary market was relatively bearish with some slight demand seen at the short to mid end of the curve. The average bond yield across the curve cleared higher by 8 bps to close at 9.82 percent from 9.74 percent on the previous day. Average yields across short tenor, medium tenor, and long tenor of the curve expanded by 9 bps, 2 bps, and 5 bps, respectively. The 15-JUL-2021 maturity bond was the best performer with a decline in yield of 30 bps, while FGNSB 15-JAN-2022 and FGNSB 16-JAN-2022 bonds were the worst performers with an increase in yield of 41 bps each. Moreover, the secondary bond market is likely to remain relatively subdued in the short term.
Global Sukuk Market Growth to Continue in 2021 and Beyond
Sukuk supply is expected to rise in the second half of 2021 after it showed strong growth during 2Q21, supported by strong investor appetite and issuers’ refinancing and funding diversification needs, Fitch Ratings says. Seasonal patterns will affect quarterly sukuk issuance which, following the summer break, is expected to pick up in the remainder of 2021 and beyond.
The sukuk market experienced strong market activity in 2Q21 after a slower 1Q21, driven by big-ticket issuance from the Saudi Arabian Oil Company (the largest corporate sukuk issued to date) and the Indonesian, Turkish and Omani sovereigns.
The growth was driven by issuers aiming to diversify their funding and taking advantage of the low interest-rate environment amid continued fiscal deficits and still-challenging economic conditions. Investor demand remains intact due to new sukuk supply scarcity and the global hunt for yield.
The sukuk market experienced strong market activity in 2Q21 after a slower 1Q21, driven by big-ticket issuance from the Saudi Arabian Oil Company (the largest corporate sukuk issued to date) and the Indonesian, Turkish and Omani sovereigns. The growth was driven by issuers aiming to diversify their funding and taking advantage of the low interest-rate environment amid continued fiscal deficits and still-challenging economic conditions. Investor demand remains intact due to new sukuk supply scarcity and the global hunt for yield.
FGN SECONDARY MARKET BENCHMARK BOND
MARKET NEWS HEADLINES
DMO To Auction N150bn FGN Bonds In July
The debt management office DMO says it will offer N150 billion bonds for subscription by auction in July on behalf of the federal government.
In a circular issued on monday, DMO said the bonds will be in three tranches, comprising n50 billion each.the first is a 10-year reopening bond to be offered at the rate of 13.98 with a maturity date in February 2021. the second is a 15-year reopening bond to be offered at 12.40 percent rate with a maturity date in march 2036; while the third is a 30-year reopening bond to be offered at 12.98 percent rate and will mature in march 2050.according to the circular, the auction date is on july 19, 2021, while the settlement date is on July 26, 2021.dmo said the transactions will be at n1, 000 per unit subject to a minimum subscription of n50,001,000 and in multiples of n1,000 thereafter. it also said that the interest is payable semi-annually with the redemption expected to be in bullet payment on the maturity date. “for re-openings of previously issued bonds, (where the coupon is already set), successful bidders will pay a price corresponding to the yield-to-maturity bid that clears the volume being auctioned, plus any accrued interest on the instrument,” the circular reads.
Saudi Arabia and U.A.E. reach deal on OPEC oil output
the OPEC standoff is officially over as saudi arabia and the united arab emirates reached a deal today on output levels. An OPEC source stated that the u.a.e. is allowed to boost the baseline used to determine how much crude the OPEC member is allowed to pump.OPEC talks on a proposal to lift production by a cumulative 2 million barrels a day between august and december fell apart earlier this month after the u.a.e. insisted that its baseline should be raised. reports from reuters states that the uae’s baseline would be lifted to 3.65 million barrels per day after the current pact expires in april 2022.investors are still reacting to the news and oil futures are marginally up. brent futures is up 0.20%, currently trading at $76.67 a barrel while the U.S oil is trading at $75.31 a barrel, down 0.07%.
Bank Of Canada Holds Interest Rate, Says It Will Curb Bond Purchases
The Bank of Canada held its key overnight interest rate at a record low 0.25% as expected on Wednesday and said it would cut its weekly net purchases of government of Canada bonds to a target of C$2 billion ($1.6 billion) from C$3 billion.In a statement, the central bank said it remained committed to keeping the interest rate unchanged until economic slack was absorbed. This is expected to happen some time in the second half of 2022.
TURKEY HOLDS RATES AGAIN AS INFLATION RULES OUT SUMMER CUT
Turkey’s central bank kept its benchmark interest rate unchanged for a fourth month on Wednesday, as rising prices and a weakening lira blight the economy’s recovery from pandemic lockdowns.The Monetary Policy Committee held its one-week repo rate at 19% as forecast by all 21 analysts surveyed by Bloomberg. Turkish inflation accelerated faster than all estimates in June due to rising global commodity prices and the easing of coronavirus restrictions, leaving little room for the reduction in borrowing costs President Recep Tayyip Erdogan has sought for July or August.
NAIRA LOSES AT OFFICIAL MARKET
The naira fell against the U.S. dollar at the official market on Tuesday, after it gained slightly in the previous session of the market segment on Monday.The currency remained unchanged at the black market window for two consecutive sessions on a stretch.Data posted on the FMDQ Security Exchange where forex is officially traded showed that the local unit closed at N411.75 per $1 at the official window on Tuesday.This represents a N0.25 or 0.10 per cent from N411.50 rate it exchanged hands with the greenback currency in the previous session on Monday.The last time the currency closed at N411.75 on the dot was on Friday last week.The touched an intraday low of N412.50 and oscillated to a high of N400.00 before closing at N411.75 as of the close of business on Tuesday.
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Analyst: Judith Idialu: Zock capital and Investment LLC,
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