Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Saturday, December 30, 2018/ 04:23AM / Zedcrest Capital
KEY
INDICATORS
Indicator |
Value |
Commentary |
Inflation |
11.26% |
As at November 21, 2018. A c.2bps down from 11.28% recorded in
September 2018 |
MPR |
14.00% |
Left Unchanged for the 12th Consecutive Time at the Nov.
22, 2018 MPC Meeting |
External Reserves |
$42.08bn |
As at November 29, 2018. A c.0.20% increase from $41.99bn on November
28, 2018 |
Brent Crude |
$59.54pb |
As at November 30, 2018. A c.0.25% decrease from $59.69pb on November 29, 2018 |
Bonds
The Bond market remained firmly
bearish amidst further increase in rates at today’s OMO auction and more
risk-off sentiments from offshore investors. Yields rose to YTD record highs
closing at 15.63% on the average, c.19bps higher than the previous day’s close.
Going into the new month, we
expect the bearish trend in the market to carry on as there is still room for
further uptick in yields as we approach year end. We expect yields to test the
16.00% resistance level as risk-off sentiments persist till the early primary
market auction.
Benchmark
FGN Bonds |
|||
Description |
Bid (%) |
Offer (%) |
Day Change
(%) |
15.54 13-Feb-20 |
15.43 |
14.54 |
0.43 |
14.50 15-Jul-21 |
15.58 |
15.31 |
0.15 |
16.39 27-Jan-22 |
14.93 |
14.34 |
0.20 |
14.20 14-Mar-24 |
15.31 |
14.98 |
0.23 |
12.50 22-Jan-26 |
15.82 |
15.62 |
0.12 |
16.29 17-Mar-27 |
15.80 |
15.71 |
0.04 |
13.98 23-Feb-28 |
15.98 |
15.87 |
0.08 |
12.15 18-Jul-34 |
15.87 |
15.50 |
0.26 |
12.40 18-Mar-36 |
15.77 |
15.65 |
0.14 |
16.2499 18-Apr-37 |
15.77 |
15.58 |
0.22 |
Source: Zedcrest Dealing Desk
Treasury Bills
The bearish trend in the T-bills
market persisted today, as the CBN further drained system liquidity with a
third OMO auction this week. Further increases of stop rates by the CBN led to
a rise in yields across the NTB curve, as yields expanded by c.42bps on the
average across the benchmark securities.
At the OMO auction, the CBN however sold a total of N119.20bn
across three maturities on offer. The Apex bank again raised stop rates on the
98-, 182- and 364-day bills; clearing at 11.75% (+10bps), 13.50% (+30bps) and 15.00%
(+20bps) respectively.
Maturing
NTBills in the month of December 2018 (N78.05bn) as well as part of January
2019 maturities (N84.45bn) will be redeemed by the DMO next month, a notice
from the CBN stated. There will therefore be no NTB PMA auctions on 13th
and 20th December 2018.
We
expect market to trade cautiously going into December as the CBN continues its
aggressive mop-up strategy. With no other primary market supply, the OMO stop
rates will largely dictate the direction of yields in the coming month.
OMO Auction Result |
||||
Tenor |
Rate (%) |
Offer (₦’bn) |
Sub (₦'bn) |
Sale (₦'bn) |
97-days |
11.75 |
20.00 |
0.006 |
0.006 |
181-days |
13.50 |
30.00 |
6.34 |
6.34 |
342-days |
15.00 |
50.00 |
113.48 |
113.48 |
|
|||
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
3-Jan-19 |
14.00 |
12.75 |
0.60 |
14-Feb-19 |
14.00 |
13.26 |
0.50 |
14-Mar-19 |
13.30 |
12.75 |
0.20 |
4-Apr-19 |
14.00 |
12.85 |
1.00 |
2-May-19 |
14.00 |
12.75 |
0.00 |
18-Jul-19 |
14.00 |
12.75 |
1.00 |
1-Aug-19 |
14.00 |
13.50 |
0.05 |
12-Sep-19 |
14.95 |
14.50 |
0.30 |
3-Oct-19 |
14.95 |
14.55 |
0.25 |
14-Nov-19 |
14.95 |
14.60 |
0.25 |
Source:
Zedcrest Dealing Desk
Money
Market
With the sale of
OMO securities (c.N119.92bn) by the CBN for the third time this week, Money Market
rates ticked higher as system liquidity tightened. Open Buy-Back (OBB) and Overnight
(O/N) rates closed at 16.57% (from 13.83%) and 17.36% (from 14.83%)
respectively as market participant expected late credits from FAAC payments. System liquidity is consequently estimated
at c.N32bn as at close of business today.
We expect
funding rates to drop significantly opening next week, as inflows from October
FAAC payments and OMO maturities of c.N684.84bn hit the system. The CBN is
expected to aggressively mop up excess liquidity, and we expect several OMO auctions
during the coming week.
Money Market Rates |
||
|
Current (%) |
Previous (%) |
Open Buy Back (OBB) |
16.57 |
13.83 |
Overnight (O/N) |
17.36 |
14.83 |
Source: FMDQ, Zedcrest
Research
FX Market
At the Interbank market, the
Naira/USD rate remained unchanged to close at N306.80/$ (spot) and N359.81/$
(SMIS). At the I&E FX window a total of $384.26m was traded in 359 deals,
with rates ranging between N358.50/$ - N365.00/$. The NAFEX closing rate depreciated
by c.0.01% to close at N364.10/$ from N364.08/$ previously.
Further depreciation of the Naira
halted today at the parallel markets, as the cash rate remained stable at
N370/$ while the transfer rate also closed at N373/$.
The Central Bank introduced a
special intervention FX sale to BDCs to accommodate seasonal increase in demand
for Personal/BTA Travel Allowance. In addition to regular sales, the Apex bank
will sell $15,000.00/BDC on Thursdays, commencing 6th December,
2018. We expect this supply to calm the volatility at the parallel markets in
the new month.
FX Market |
||
|
Current (N/$) |
Previous ( N/$) |
CBN Spot |
306.80 |
306.80 |
CBN SMIS |
359.81 |
359.81 |
I&E FX Window |
364.10 |
364.08 |
Cash Market |
370.00 |
370.00 |
Transfer Market |
373.00 |
372.50 |
Source: CBN, FMDQ, REXEL
BDC
Eurobonds
It was a
quiet trading session for NGERIA
Sovereign Eurobonds, amidst little to no flows witnessed. Yields recorded
no change across the curve from the previous day’s close.
Similarly, the
NGERIA Corps also traded relatively
quiet across most tracked tickers. We,however witnessed demand for the FBNNL
and Zenith papers. The Zenith 19s saw the most demand interest, as yields
dropped by c.33bps on the day.
Related News
1. Fixed Income
Markets Trend Bearish as CBN Hikes OMO Rate
2. Stop Rates Remain Unchanged As The CBN Successfully Rolls
Over Maturing Ntbills
3. Nigeria’s Access Bank to Repay $400 Million Bond Two Years
Early
4. Fitch Rates Stanbic IBTC Bank Plc's Upcoming Senior Notes
'AAA(nga)(EXP)'
5. Bearish Market for Nigerian Sovereign Eurobonds as Oil
Price Trades Again Below the $60 Mark
6. Central Bank Conducts Yet Another OMO Auction in a Bid to
Manage Excess Liquidity
7. Treasury Bill Auction Schedule For November 28th 2018
8. Elevated Liquidity Levels Pressure Rates Lower as PMA
Holds on Wednesday
9.
Money Market Rate Decreased Marginally as Overnight Rate
Fell to 6.58%