Bearish Reversals in FI yields as CBN Resumes OMO at Slightly Higher Rate


Thursday, April 26, 2018 /11:30 PM/Zedcrest Capital

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The Bond market opened on a fairly stable note, but later turned bearish as investors took profits especially on the long end of the curve which was sold up to c.13% following news of an improvement in the CBN’s OMO Stop rate to an effective yield of 13% (12.00% disc) on the 245-day bill offered. Yields consequently rose by c.14bps on average. We expect the market to close the week on a relatively stable note as yields are not expected to trend significantly above their current levels.


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Treasury Bills

The T-bills market also turned bearish, following the news of an OMO auction sale to all subscribers at 12.00% on the longer dated bill offered. The CBN eventually prorated the bill at about 1 to 5 of the total subscriptions of N602.05bn, while it sold to all subscribers (N111bn) for the 91 day bill offered at 10.90%. We expect the market to be slightly bullish tomorrow, as market players would be looking to fill their lost bids, even as uncertainty persists as to the stability, trend and expected sizes of the CBN’s future OMO issuances.


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Money Market

The OBB and OVN rates remained relatively stable, closing at 3.17% and 3.67%, as outflows of c.N226bn for today’s OMO auction sales were offset by OMO T-bill repayments totaling N267bn. We expect rates to inch slightly higher tomorrow, due to expected outflows for Retail SMIS and Bond auction settlement.


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FX Market

The Interbank rate remained stable its previous rate of N305.65/$, with the CBN’s external reserves recorded to have improved by 1.53% to $47.01bn as at 16-April. The NAFEX rate appreciated slightly by 0.02% to N360.42/$. Rates in the Unofficial market however depreciated slightly by 0.03% to N361.50/$.


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The NGERIA Sovereigns recovered slightly from its previous day’s bearishness with slight pullbacks especially on the 10– and 30-yr bonds which gained +0.20pt on average.


The NGERIA Corps remained scantily traded with investors selling off mostly on the FBNNL 21s and FIDBAN 22s which lost about –0.25pt. The SEPLLN 23s remained stable at 101.50/102.25, with few trades observed around the 101.60 area.


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