Bonds & Fixed Income | |
Bonds & Fixed Income | |
3574 VIEWS | |
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Friday, August 30, 2018 /11:05PM / Zedcrest Capital
***PMI Grows at Faster Rater Rate in August*** - CBN
KEY INDICATORS
Indicator |
Value |
Commentary |
Inflation |
11.14% |
As at August 15, 2018, 9bps down from 11.23% recorded in June 2018. |
MPR |
14.00% |
Next MPC meeting scheduled for September 24 & 25, 2018 |
External Reserves |
$45.87bn |
As at August 29, 2018. A c.0.07% decrease from $45.90bn on August 28 2018 |
Brent Crude |
$77.69pb |
As at August 31, 2018. A c.0.41% increase, from $78.01pb on August 30, 2018 |
Bonds
The Bond market closed the month on a bearish note, with continued selloffs pressuring yields higher by c.8bps across the curve. We witnessed the most selloffs on the 2026s which was sold off to 15.26%.
Amid continued weakness in Emerging market assets and expected increase in FGN Borrowings, we maintain a bearish outlook for the coming month.
Secondary Market Bonds |
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Description |
Bid (%) |
Offer (%) |
Day Change (%) |
15.54 13-Feb-20 |
14.37 |
14.05 |
0.00 |
14.50 15-Jul-21 |
14.65 |
14.37 |
0.04 |
16.39 27-Jan-22 |
14.64 |
14.11 |
0.00 |
14.20 14-Mar-24 |
15.20 |
14.74 |
0.32 |
12.50 22-Jan-26 |
15.25 |
15.14 |
0.03 |
16.29 17-Mar-27 |
15.18 |
15.12 |
0.08 |
13.98 23-Feb-28 |
15.17 |
15.07 |
0.04 |
12.15 18-Jul-34 |
15.32 |
15.10 |
0.11 |
12.40 18-Mar-36 |
15.33 |
15.11 |
0.15 |
16.2499 18-Apr-37 |
15.26 |
15.11 |
0.08 |
Source: Zedcrest Dealing Desk
Treasury Bills
Yields in the T-bills market moderated by c.20bps, due to the buoyant level of liquidity in the system, on the back of the OMO maturities and Retail FX refunds in the previous session. Market players however constrained demand to the shorter end of the curve, with only few real money client orders seen on the mid tenor bills (Feb & Mar), which were bought down to the last PMA levels (12.30%), and no further.
Barring an OMO auction by the CBN on Monday, we expect yields to still moderate slightly, due to the significant inflows anticipated from FAAC payments to state and Local Governments. We however expect most market players to adopt a wait and see approach, while those with pressure to invest are expected to still maintain the short end play for now.
Secondary Market Treasury Bills
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
13-Sep-18 |
11.50 |
11.10 |
(0.55) |
4-Oct-18 |
12.05 |
11.20 |
0.00 |
1-Nov-18 |
11.35 |
11.25 |
(1.70) |
6-Dec-18 |
13.00 |
12.10 |
0.40 |
3-Jan-19 |
13.00 |
12.20 |
0.00 |
14-Feb-19 |
13.00 |
12.50 |
0.00 |
14-Mar-19 |
12.70 |
12.35 |
(0.30) |
4-Apr-19 |
13.00 |
12.25 |
0.00 |
18-Jul-19 |
12.55 |
12.20 |
0.00 |
Source: Zedcrest Dealing Desk
The OBB and OVN rates fell sharply to 6.00% and 6.83% respectively in today’s session. This came on the backdrop of the significant increase in net system liquidity from the previous session, with opening figures published at c.N780bn from c.N105bn previously. This is however estimated to have declined to c.N430bn as at COB today, due to estimated outflows for retail FX funding by banks.
Due to expected inflows from FAAC payments, we expect rates to decline further on Monday, barring a significant liquidity management action by the CBN.
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Current (%) |
Previous (%) |
Open Buy Back (OBB) |
6.00 |
10.67 |
Overnight (O/N) |
6.83 |
11.67 |
FX Market
The Naira/USD rate remained stable at the interbank, closing at N306.15/$. At the I&E FX window, a total of $425.98mn was traded in 472 deals, with rates ranging between N355.00/$ - N364.00/$. The NAFEX reference rate depreciated by 0.09% to N362.32/$ from N363.06/$ previously.
At the parallel market, the cash and transfer rates appreciated by 10k and 50k to N359.30/$ and N361.50/$ respectively.
FX Market |
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|
Current (N/$) |
Previous ( N/$) |
CBN Spot |
306.15 |
306.15 |
CBN SMIS |
357.95 |
357.95 |
I&E FX Window |
362.64 |
362.32 |
Cash Market |
359.30 |
359.40 |
Transfer Market |
361.50 |
362.00 |
Eurobonds
Selloffs Persisted on the NGERIA Sovs, as trade tensions persisted, while sentiments remained negative across the EM space. Yields rose by c.10bps across the curve, with the most selloffs seen on the Feb 2032 which rose by c.11bps on the day.
The NGERIA Corps were muted, except for slight interests witnessed on the DIAMBK 19s, consequently pushing yields on the bond below the 10% mark.
Related News
1. Bond Yields Hit 9-Month High as CBN holds off on OMO Sale
2. Bond Yields to Break 15% Resistance, as DMO Clears 1yr PMA Bill at c.15% Effective Yield
3. Bond Bulls Cherry-Pick on Higher Yielding Maturities as Market Maintains Balance
4. Summary of August 2018 FGN Bond Auction Results
5. Short end T-bill Yields Trend Lower as Market players Maintain Risk Averse Posture
6. Fixed Income Market Monitor - Average T-Bills Yield Fell by 5bps to Close The Week at 12.15%
7. Markets close on a Calm note as Locals Remain Net Buyers of Bonds
8. Bond Yields Moderate Slightly on Renewed Local Demand
9. Another Mark of Debt Externalisation
10. Yields Retrace Slightly as Offshore Sellers Take a Breather
11. Bearish Trend Sustained as Average Rate Advanced 19bps to 11.7%