Bond Yields Compress Further as Coupon Expectations Sustain Buying Interests

Monday, January 14, 2018/ 05:30PM / Zedcrest Capital

***Nigeria and South Africa to recover slowly in 2019 *** - Moody’s

KEY INDICATORS

Bonds

In line with our expectations, yields in the bond market moderated further by c.2bps, even as offers pulled further away following demand on the mid to long end of the curve, especially the 27s and 37s.

We expect yields to remain moderated for most of the week as inflows from coupon payments are expected to support bullish sentiments in the near term.

Source: Zedcrest Dealing Desk

Treasury Bills

Yields in the T-bills market moderated slightly in today’s session as market players cherry-picked on some maturities in anticipation of client demand ahead of the forthcoming NTB auction. This was despite the c.25bn OMO sale by the CBN.

We expect yields to remain relatively stable on the back of expected client flows into the market.

Source: Zedcrest Dealing Desk

Money Market

Rates in the money market spiked by c.12pct, with the OBB and OVN rates closing the day at 31.67% and 35.25% respectively. This came on the back of a wholesale FX intervention by the CBN which is estimated to have worsened system liquidity to c.N225bn negative as at COB today.

We expect rates to remain elevated, as there are no significant inflows expected tomorrow.

Source: FMDQ, Zedcrest Research

FX Market

At the Interbank, the Naira/USD rate appreciated by c.0.02% to N306.85/$ at the spot market, while the SMIS rate remained unchanged at N358.13/$. The NAFEX rate in the I&E window appreciated by c.0.18% to N364.30/$ from N364.94/$ previously, while the cash and transfer rates remained unchanged at N360.80/$ and N365.00/$ respectively at the parallel market.

Source: CBN, FMDQ, REXEL BDC

Eurobonds

Investors’ interests on the NGERIA Sovereigns cooled off in today’s session, as yields expanded by c.7bps on average, following slight selloff on the longer end of the curve.

In the NGERIA Corps investors renewed interests for the DIAMBK 19s and Zenith 22s.

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