15/12/2019
The local money market surprised most fixed income traders again in the middle of 4Q2019 with another sudden & extremely bullish trend since early Nov-2019 with yields falling from av. >14% to av. <7% in 6 weeks thereby confirming the ”major bottom” prediction in our August-2019 forecast (check above).
In the short-term, trader’s navigator trendline (STF_BOND – the above chart) of the NGSEO&G Index (alias Quasi Bond Market Index) seems to be forming a ”double top” pattern which is a bearish signal. We patiently await a new firm bearish market trend confirmation. Notwithstanding, in the coming trading weeks, we expect the local bond market to correct bearishly into the 1Q2020.
Thus, we recommend to investors to consider partial profit takings in all bills, bonds & papers market(s) thus an increase in cash call position(s) till further notice.
6/2/2020
At the moment, the local money market av. yield is <6% p.a and most fixed income dealers expect the fall to continue with the coming large volume of OMO maturities.
In the short-term, our Trader’s Navigator trendline (STF_BOND – the above chart) of the NGSEO&G Index (alias Quasi Bond Market Index) seems to have formed a bearish divergence (showing by the thick lines) and the indicator is also forming lower highs (shown by the arrow) which is also a bearish signal. Thus, we have a bearish trend confirmation – the next question is: will it be short-term or long-term trend?
We suspect that we are entering another sudden & sharp rise in yields which will again catch dealers & fixed income investors on the wrong side of the local bond market within the remainder of the 1Q2020. Thus, we maintain our early recommendation to investors to take profit in all bills, bonds & papers market(s) thus an increase in cash call position(s) till further notice.
6/5/2020
The local money market av. yield falls further <4% p.a though most fixed income dealers expected a yield rise due to the much higher federal govt deficit (thus an increment in bond supply like the extra N850bln bond supply expected from DMO into the domestic market) caused by the corona pandemic but the money market remains highly liquidity. The bulls still reign, expanding the bull trap. At the moment, most treasury bond dealers are keeping out of the bond market thereby reducing further secondary market supply.
In the intermediate-term, the stochastic (see the above chart) of the NGSEO&G Index (alias Quasi Bond Market Index) has formed a double bottom thus a potential bullish signal but the index seems to be forming a sideways triangle wave pattern thus a market consolidation.
We suspect that we will remain in the long-term bullish money market which started late Sept-2019 longer than expected. Notwithstanding, we maintain our early recommendation to investors to take some profit, increase cash call position(s) and consider to take position in equity whose risk reward ratio is favourable or in primary auctions of long-end bonds with coupon higher than average inflation rate.