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A Quiet Trading Session as Daily OMO Auction Takes Centre Stage

Bonds & Fixed Income	2246 VIEWS
Bonds & Fixed Income
2246 VIEWS

Thursday, February 07, 2019 06:10AM / Zedcrest Capital

KEY INDICATORS

Indicator	Value	Commentary
Inflation	11.44%	As at January 16, 2019. A c.16bps increase from 11.28% recorded in November 2018
MPR	14.00%	Left Unchanged for the 15^th Consecutive Time at the Jan. 22, 2019 MPC Meeting
External Reserves	$43.02bn	As at February 5, 2019. A c.0.05% decrease from $43.04bn on February 4, 2019
Brent Crude	$62.61pb	As at February 6, 2019. A c.0.72% decrease from $62.16pb on February 5, 2019

Bonds

The Bond market had a quiet trading session, with very little flows seen on select maturities. Yields expanded marginally by c.2bps on the day, as the market marks time ahead of the coming national elections and bond auction later in the month.

As demand remains weak for bonds at sub-15% yields, we maintain our expectation for a flat market in the coming weeks.

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
15.54 13-Feb-20	15.15	14.45	0.06
14.50 15-Jul-21	15.07	14.89	(0.02)
16.39 27-Jan-22	14.90	14.46	0.02
14.20 14-Mar-24	14.76	14.47	0.03
12.50 22-Jan-26	14.95	14.76	0.09
16.29 17-Mar-27	15.03	14.90	(0.01)
13.98 23-Feb-28	15.12	15.03	(0.02)
12.15 18-Jul-34	14.99	14.86	(0.01)
12.40 18-Mar-36	15.02	14.85	0.01
16.2499 18-Apr-37	14.98	14.83	0.03

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market continued to trade on a quiet note, with relatively lower volumes traded as the CBN continued its daily mop-up strategy by floating another OMO auction. Yields across the NTB curve compressed by c.16bps on the average. At the OMO auction, the CBN sold a total of c.N66.02bn while maintaining stop rates across all tenors.

We expect yields to remain relatively flat as the CBN is expected to float a more aggressive OMO auction to mop up maturities of c.N315bn.

Treasury Bills
Description	Bid (%)	Offer (%)	Day Change (%)
14-Feb-19	13.00	12.15	0.00
14-Mar-19	11.75	11.35	0.00
4-Apr-19	11.00	10.00	(1.75)
2-May-19	11.00	10.75	(0.50)
13-Jun-19	11.70	11.00	0.20
18-Jul-19	13.00	12.50	0.00
1-Aug-19	13.25	13.00	(0.05)
12-Sep-19	14.70	14.35	0.20
3-Oct-19	14.85	14.35	0.00
14-Nov-19	14.90	14.65	0.00
5-Dec-19	14.95	14.80	0.00

Source: Zedcrest Dealing Desk

Money Market

Rates in the money market trended higher by c.1pct as the CBN continued its daily mop-up strategy with a c.N6602bn OMO sale. The OBB and OVN rates consequently ended the session at 20.67% and 21.83% respectively.

We expect rates to crash opening tomorrow as OMO maturities ease up system liquidity levels.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	20.67	19.50
Overnight (O/N)	21.83	20.92

Source: FMDQ, Zedcrest Research

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.75/$ (spot) and N357.10/$ (SMIS). The NAFEX rate however saw a slight depreciation by c.0.15% to close at N362.72/$. At the parallel market, the cash and transfer rates depreciated by c.45k to close at N385.80/$ and N365.00/$ respectively.

FX Market
	Current (N/$)	Previous ( N/$)
CBN Spot	306.70	306.70
CBN SMIS	357.10	357.10
I&E FX Window	362.72	362.19
Cash Market	358.20	357.80
Transfer Market	365.00	364.50

Source: CBN, FMDQ, REXEL BDC

Eurobonds

The recent bullish run on the NGERIA Sovereigns slowed during today’s trading session, with yields compressing by a single basis point. Demand witnessed at the mid-end of the curve, while sell interests stayed at the long-end.

Interests for select NGERIA Corps tickers continue to gradually pick up, as demand was witnessed for the UBANL 2022s which compressed by c.13bps on the day.