Bonds & Fixed Income | |
Bonds & Fixed Income | |
3856 VIEWS | |
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Friday, January 18, 2018/ 06:10AM / Zedcrest Capital
***$1.1bn GI loan to create jobs, tackle food
insufficiency*** – FG
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% |
MPC Meeting to be held on the 21st and 22nd of January 2019 |
External Reserves |
$43.11bn |
As at January 16, 2019. A c.0.01% increase from $43.10bn on January
15, 2019 |
Brent Crude |
$61.08pb |
As at January 17, 2019. A c.1.63% increase from $60.81pb on January 16, 2018 |
Bonds
Interests in the bond market were largely focused on the mid
tenors (27s and 28s) which were significantly compressed by c.16bps and c.30bps
respectively, with the 27s breaking the 15% support to trade at a low of 14.80%
whilst the 28s reached a low of 15.00%.
We have witnessed significant inflows from offshores as seen in
the significant rise in volumes traded at the I&E window to c.$583m, with a
corresponding compression in rates to a 4-Month low of N362.70/$. We have
however note that the offshores have remained short duration, with most of the
inflows invested in Treasury bills and others finding their way into the
equities market which have posted four consecutive sessions of gains.
We consequently posit that the significant decline in bond yields
have been largely driven by demand from local investors seeking to reinvest
inflows from coupon payments. Whilst we expect this trend to persist in the
near term, we expect yields to reverse above the 15% mark as the coupon demand
wanes and the DMO floats the January bond auction which we expect to be
relatively sizeable.
We consequently advise clients to take profit on bonds at these levels and to remain short duration until after the bond auction for the month.
Benchmark
FGN Bonds |
|||
Description |
Bid (%) |
Offer (%) |
Day Change
(%) |
15.54 13-Feb-20 |
14.98 |
13.99 |
0.00 |
14.50 15-Jul-21 |
15.29 |
14.87 |
(0.13) |
16.39 27-Jan-22 |
15.05 |
14.51 |
0.00 |
14.20 14-Mar-24 |
15.12 |
14.61 |
(0.01) |
12.50 22-Jan-26 |
15.43 |
14.97 |
(0.05) |
16.29 17-Mar-27 |
14.95 |
14.88 |
(0.16) |
13.98 23-Feb-28 |
15.17 |
15.05 |
(0.30) |
12.15 18-Jul-34 |
15.20 |
14.92 |
(0.18) |
12.40 18-Mar-36 |
15.20 |
14.99 |
(0.18) |
16.2499 18-Apr-37 |
15.17 |
14.84 |
(0.01) |
Source: Zedcrest Dealing
Desk
Treasury Bills
Yields in
the T-bills moderated further by c.10bps in today’s session, as buying
interests remained supported by slight offshore demand in the market and
inflows from OMO and PMA repayments.
The CBN
however floated an OMO auction which attracted most of the offshore inflows that
came into the market, with total subscriptions of c.N526bn of the N550bn
offered and rates maintained across all tenors offered. Worthy of note however
was the increase in demand for the short and mid tenor OMO offerings.
We however
expect yields to trend higher tomorrow, with the CBN likely to conduct a
further OMO auction, whilst the banks fund for a Retail FX auction by the CBN,
all of which would compress system liquidity and fuel slight selloff mostly on
the short end of the curve.
|
|||
Description |
Bid (%) |
Offer (%) |
Day Change
(%) |
14-Feb-19 |
14.20 |
13.75 |
(0.80) |
14-Mar-19 |
14.00 |
12.00 |
(1.00) |
4-Apr-19 |
14.00 |
13.20 |
(0.40) |
2-May-19 |
13.00 |
12.80 |
(0.10) |
13-Jun-19 |
13.20 |
12.90 |
0.05 |
18-Jul-19 |
12.90 |
12.65 |
(1.10) |
1-Aug-19 |
14.50 |
13.75 |
0.00 |
12-Sep-19 |
14.75 |
14.30 |
(0.10) |
3-Oct-19 |
14.90 |
14.70 |
0.10 |
14-Nov-19 |
14.80 |
14.20 |
0.00 |
5-Dec-19 |
14.90 |
14.75 |
(0.10) |
Source: Zedcrest Dealing Desk
Money
Market
Rates in the
money market moderated by c.5pct, as inflows from Net OMO and PMA repayments
(c.N80bn) bolstered system liquidity to c.N60bn Negative, from a Negative
position of c.N140bn previously. The OBB and OVN rates consequently closed the
session at 13.00% and 13.50% respectively.
We expect rates
to trend higher tomorrow with the CBN expected to debit banks for its bi-weekly
retail FX intervention.
Money Market Rates |
||
|
Current (%) |
Previous (%) |
Open Buy Back (OBB) |
13.00 |
18.17 |
Overnight (O/N) |
13.50 |
19.75 |
Source: FMDQ, Zedcrest
Research
FX Market
At the Interbank, the Naira/USD rate
fell back by c.0.16% to N306.85/$ at the spot market, while the SMIS rate remained
unchanged at N356.73/$. The NAFEX rate in the I&E window also appreciated further
by c.0.10% to a 4-Month low of N362.70/$ following continued FX supply from
offshores into the market, with total traded volumes also hitting a 4-Month
high of $583m. Rates at the parallel market however remained pressured, with
the cash rate rising by 0.06% to N361.20/$, while the transfer rate remained unchanged
at N365.50/$.
FX Market |
||
|
Current (N/$) |
Previous ( N/$) |
CBN Spot |
306.35 |
306.85 |
CBN SMIS |
356.73 |
356.73 |
I&E FX Window |
363.05 |
363.61 |
Cash Market |
361.20 |
361.00 |
Transfer Market |
365.50 |
365.50 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
Investors’ interests
waned slightly on the NGERIA Sovereigns
with yields retracing higher by c.3bps average following slight sell on the
long end of the curve (38s – 49s).
In the NGERIA Corps investors interest
dampened slightly on the DIAMBK 19s and FBNNL 21s which rose by c.15bps, we
however witnessed slight interests on the ACCESS 21s Snr.
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