Bond Yields Rise on Weak Local Demand and Slight Offshore Sell

Bonds & Fixed Income
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Monday, February 5, 2018, 7.00PM/Zedcrest Capital

***FG, States, LGs Shared N5.9tn in 2017***

KEY INDICATORS

Inflation

15.37%

Declined by 0.54% in December from 15.90% in November 2017

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting of November 2017

External Reserves

$40.79billion

Accreted 1.74% as at 2nd February from $40.75 as at 1st February 2018

Brent Crude

$68.37pb

Fell by 0.39% from $68.64pb on 2nd February 2018

 

Bonds

The bond market traded on a slightly bearish note due to slight sell by some offshore clients on the 10– and 20-yr bonds. Yields however recorded a substantial uptick (c.7bps) due to weak demand from domestic participants. We observe that developments in the global bond markets (the US in particular) have begun to shape offshore investors allocation to emerging market debt. This has been earlier anticipated following expectations of a rate hike by the US FED. Barring any continued sell off from offshore, we expect relative stability in the mkt, with some possible downward retracements, as some local clients are expected to begin eyeing the slightly higher yields on bonds.  

Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

13.92

13.85

0.07

15.54 13-Feb-20

13.64

13.57

0.06

14.50 15-Jul-21

13.37

13.30

0.03

16.39 27-Jan-22

13.22

13.15

0.10

14.20 14-Mar-24

13.49

13.42

0.04

12.50 22-Jan-26

13.49

13.42

0.07

16.29 17-Mar-27

13.54

13.47

0.06

12.15 18-Jul-34

13.50

13.43

0.07

12.40 18-Mar-36

13.41

13.34

0.05

16.25 18-Apr-37

13.41

13.34

0.10

 

 

 

 

 

 

 

 

 
















Source: Zedcrest Dealing Desk 

Treasury Bills
The T-bills market traded on a relatively quiet note, with slight buys observed on some short tenured bills. The Medium to long end of the curve however traded on a relatively flat note, as the CBN resumed its OMO auction, selling a total c.N116bn of the 98– and 266-day bills, with rates maintained at 12.60% and 14.40% respectively. We expect this flattish trend to persist, as the CBN is expected to continue with its OMO issuance. 

 

Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

1-Mar-18

12.50

12.35

(0.10)

5-Apr-18

13.55

13.40

0.00

3-May-18

13.40

13.25

0.25

14-Jun-18

14.30

14.15

0.00

5-Jul-18

14.05

13.90

0.00

2-Aug-18

13.60

13.45

0.00

20-Sep-18

14.20

14.05

0.00

4-Oct-18

14.30

14.15

(0.05)

1-Nov-18

13.90

13.75

0.00

3-Jan-19

13.80

13.65

0.10

Source: Zedcrest Dealing Desk

 
Money Market
The OBB and OVN rates jumped higher to 18.40% and 19.33%, following debits for the OMO and wholesale FX sales by the CBN. System Liquidity is consequently estimated to close on a marginally negative note. We expect rates to however moderate slightly tomorrow, as there are no expected significant funding pressures on the banks

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

18.40

11.60

Overnight (O/N)

19.33

12.17








Source: Zedcrest Dealing Desk

FX Market
The CBN Official spot rate depreciated by 0.02% to N305.80/$ from its previous day rate of N305.75/$. This was despite the CBN’s intervention in the wholesale, SME and Invisibles segment of the market to the tune of $210m est. The CBN’s external reserves is recorded to have improved by 1.74% to $40.79bn as at 2nd of February, 2018.

The spot rate in the Investors and Exporters’ FX Window appreciated by 0.12% to close at N360.25/$ from N360.70/$.

Rates in the Unofficial market remained stable at N361.60/$

 FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.80

305.75

CBN SMIS

330.00

330.00

I&E FX Window

360.25

360.70

Parallel Market

361.60

361.60
Source: CBN, FMDQ, REXEL BDC


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1.     DMO issues 2 and 3 year Savings Bonds at 10.277% and 11.277% respectively

2.     Nigeria’s Re-Inclusion to the JP Morgan Index, How Feasible?

3.     CBN sells N215bn OMO T-bills to Mop up Excess Liquidity Inflows

4.     CBN sells N253bn T-bills at c.10bps lower than previous Auction Rate

5.     FGN Domestic Debt Service Payment Increased In Line With The Stock of Domestic Debt

6.     Naira Depreciates slightly despite $210m FX intervention by the CBN

7.     Decent Start to the Year for the DMO

8.     Proposed USD2.5billion Eurobond Issuance in Q1 2018

9.     First FGN Bond Auction for the Year Oversubscribed 

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