Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Wednesday, September 31, 2018/ 06.19PM / Zedcrest Capital
***Manufacturing Sector Expands at Faster Rate in
October*** - CBN
KEY
INDICATORS
Indicator |
Value |
Commentary |
Inflation |
11.28% |
As at October 16, 2018, 5bps up from 11.23% recorded in August
2018. |
MPR |
14.00% |
Left Unchanged for the 11th Consecutive Time at the
Sept. 25, 2018 MPC Meeting |
External Reserves |
$42.06bn |
As at October 30, 2018. A c.0.17% decrease from $42.13bn on October
29, 2018 |
Brent Crude |
$76.15pb |
As at October 31, 2018. A c.0.57% increase from $75.72pb on October 30, 2018 |
Bonds
The bond market traded on
a relatively mixed note, with slight demand on the short end of the curve
offset by selloffs on the mid to long end, notably on the 2028s and 2034s,
which were sold off to 15.68% and 15.48% respectively. Yields were slightly
lower by c.3bps on the day, but closed the month at c.31bps higher M/M, due to
the double OMO T-bill rate hikes by the CBN and slight offshore sell toward
month end.
In the coming month, we
expect the market to remain slightly bearish, with the DMO confirming the weak
fiscal position of the FG via higher stop rates in recent auctions
(Bonds/T-bills), and the CBN also expected to sustain higher rates in the
T-bills market, in a bid to checkmate excessive FPI outflows.
Benchmark
FGN Bonds |
|||
Description |
Bid (%) |
Offer (%) |
Day Change
(%) |
15.54 13-Feb-20 |
14.20 |
13.90 |
(0.49) |
14.50 15-Jul-21 |
15.33 |
15.03 |
(0.07) |
16.39 27-Jan-22 |
14.84 |
14.37 |
(0.02) |
14.20 14-Mar-24 |
15.28 |
15.03 |
(0.02) |
12.50 22-Jan-26 |
15.43 |
15.29 |
0.01 |
16.29 17-Mar-27 |
15.57 |
15.41 |
0.13 |
13.98 23-Feb-28 |
15.62 |
15.53 |
0.08 |
12.15 18-Jul-34 |
15.58 |
15.41 |
0.01 |
12.40 18-Mar-36 |
15.47 |
15.23 |
0.06 |
16.2499 18-Apr-37 |
15.26 |
15.19 |
(0.01) |
Source: Zedcrest Dealing Desk
Treasury
Bills
Yields inched slightly higher by c.6bps in today’s
session, following a weaker than expected NTB auction result, which prompted
slight selloff on some mid and long tenured maturities. Despite the significant
boost in system liquidity from FAAC payments in the previous session, trading
activities remained very low as market players anticipated a further OMO
auction by the CBN to mop up c.N382bn in OMO maturities tomorrow.
We expect the market to tilt slightly bearish tomorrow,
with the lift in the PMA rates on the 182-day (+95bps) and 364-day bills
(+80bps), fuelling speculations for a further hike in OMO rates by the CBN.
PMA
Result – 31 October 2018 |
||||
Tenor |
Rate (%) |
Offer
(N'bn) |
Sub
(N'bn) |
Sale
(N'bn) |
91 days |
10.98 |
9.54 |
7.91 |
7.85 |
182 days |
13.49 |
47.71 |
43.52 |
43.52 |
364 days |
14.40 |
88.04 |
212.00 |
93.92 |
Source:
Zedcrest Research
Benchmark FGN Treasury Bills |
|||
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
6-Dec-18 |
13.10 |
12.75 |
0.20 |
3-Jan-19 |
13.10 |
12.75 |
0.20 |
14-Feb-19 |
13.00 |
12.80 |
0.10 |
14-Mar-19 |
12.90 |
12.80 |
0.05 |
4-Apr-19 |
13.00 |
12.85 |
0.05 |
18-Jul-19 |
13.10 |
12.60 |
0.00 |
1-Aug-19 |
13.70 |
13.45 |
0.00 |
12-Sep-19 |
14.40 |
14.20 |
0.25 |
3-Oct-19 |
14.30 |
14.20 |
(0.05) |
Source: Zedcrest Dealing Desk
Money
Market
The OBB and
OVN rates declined further by c.5pct to 4.33% and 4.92% respectively, as system
liquidity was significantly bolstered to c.N488bn positive, via inflows from
FAAC payments in the previous session.
We expect
rates to remain relatively stable tomorrow, with inflows from OMO maturities
c.N382bn expected to net off outflows from the expected OMO auction sale by the
CBN.
Money Market Rates |
||
|
Current (%) |
Previous (%) |
Open Buy Back (OBB) |
9.50 |
14.83 |
Overnight (O/N) |
10.33 |
15.50 |
Source: FMDQ, Zedcrest
Research
FX Market
At the Interbank, the Naira/USD
rate remained stable at N306.60/$ (spot) and N362.82/$ (SMIS). At the I&E
FX window, the NAFEX closing rate depreciated by c.0.06% to N363.54/$ from N363.32/$
previously. Rates were however unchanged
at the parallel market segment, with the cash and transfer rates closing at
N361.00/$ and N364.00/$ respectively.
FX Market |
||
|
Current (N/$) |
Previous ( N/$) |
CBN Spot |
306.60 |
306.60 |
CBN SMIS |
362.82 |
362.82 |
I&E FX Window |
363.54 |
363.32 |
Cash Market |
361.00 |
361.00 |
Transfer Market |
364.00 |
364.00 |
Source: CBN, FMDQ, REXEL
BDC
Eurobonds
The NGERIA Sovereigns weakened slightly by
c.2bps in today’s session, due to continued selling pressures witnessed mostly
on the Feb 2038 bond, now the highest yielding bond on the curve. An uptrend in
US treasuries earlier in the month, and news of fresh supply of c.$2.8bn worth
of FGN Eurobonds later in the month provided a context for an uptrend in yields
over the course of the month, with yields closing by c.63bps higher M-o-M.
The NGERIA Corps were relatively flat in
today’s session, except for slight interests seen on the UBANL 22s and slight
sell on the ACCESS 21s Sub. On a M/M basis, the highest gainers were the SEPLLN
23s (+1.25pct) and ACCESS 21s (+0.31pct), whilst the worst loss was seen on the
DIAMBK 19s (-0.32pct), in what was a relatively positive month overall for the
Nigerian Corporate Eurobonds.
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