Bond Yields Compress Slightly on Lower Inflation Expectations


Wednesday, April 11, 2018 /10:30 PM/Zedcrest Capital

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The Bond market witnessed renewed improvement  in trading activities, with yields compressing by  c.4bps on average , as initial strong bullish sentiments, largely due to lower inflation rate expectations were moderated by some profit taking later in the day. We still maintain a slight bullish outlook on the market as we anticipate a significant moderation in the expected inflation results.

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Treasury Bills

The T-bills market traded on a relatively quiet note, as market players relaxed from their strong bullish sentiments in the previous session in anticipation of a significant OMO auction by the CBN. Yields consequently stayed flat across the curve. We expect the market to be firmly bullish tomorrow due to anticipated inflows from c.N467bn OMO maturities, expected to take system liquidity to over N1trn positive. This is however expected to be moderated by a significant OMO auction sale by the CBN.


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Money Market

The OBB and OVN rates remained stable to close at 2.67% and 3.00% respectively, as system liquidity remained significantly positive, currently estimated at c.N620bn. We expect rates to remain relatively stable tomorrow, with inflows from c.N467bn OMO T-bill maturities expected to offset outflows for a much anticipated OMO T-bill sale by the CBN.


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FX Market

The Interbank rate remained stable at N305.55/$, with the CBN’s FX reserves also recorded to have improved by 1.52% to $46.75bn as at 9 April. The NAFEX rate appreciated strongly by 0.16% to a ytd low of N359.81/$. Rates in the Unofficial market however declined by 0.14% to N361.00/$.


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The NGERIA Sovereigns remained relatively stable in today’s session, with a slightly bullish bias, as yields compressed marginally by 1bp across the curve. We witnessed most trades on the 27s, 30s and 47s, which gained +0.08pt on average.


In the Nigerian banks space, investors are still selling off on the FIDBAN 22s (-0.06pt), the Zeniths and FBNNLs traded flat, whilst we witnessed renewed bullish sentiments on the UBANL 22s (+0.26pt).


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