Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Tuesday, December 18, 2018/ 08:04PM / Zedcrest Capital
***Buhari
Proposes N8.83trn Budget for 2019***
KEY
INDICATORS
Indicator |
Value |
Commentary |
Inflation |
11.28% |
As at December 14, 2018. A c.2bps increase from 11.26% recorded
in October 2018 |
MPR |
14.00% |
Left Unchanged for the 12th Consecutive Time at the
Nov. 22, 2018 MPC Meeting |
External Reserves |
$43.04bn |
As at December 17, 2018. A c.0.28% increase from $42.92bn on
December 14, 2018 |
Brent Crude |
$57.15pb |
As at December 18, 2018. A c.2.91% decrease from $58.86pb on December 17, 2018 |
Bonds
The FGN Bond market remained flat
in today’s session, as market players sought for higher yields at the bond
auction by the DMO. In line with our expectations, bids remained weak on the
2023 and 2025 bonds with rates clearing c.5bps higher at 15.25% on the 2023s
whilst they remained unchanged at 15.50% on the 2025s.
The 2028s which however enjoyed
the most interest of c.N83bn, was significantly undercut by the DMO, with a
paltry sum of N1.29bn sold of the N35bn offered and with rates clearing
significantly lower (-33bps) at 15.50%. The Auction was consequently
unsuccessful having recorded a miniature average bid to cover ratio of 0.06X.
We expect market players to
remain relatively risk off in anticipation of higher funding requirements in
the coming month.
Benchmark
FGN Bonds |
|||
Description |
Bid (%) |
Offer (%) |
Day Change
(%) |
15.54 13-Feb-20 |
15.29 |
14.94 |
0.01 |
14.50 15-Jul-21 |
15.80 |
15.58 |
0.02 |
16.39 27-Jan-22 |
15.12 |
14.92 |
0.00 |
14.20 14-Mar-24 |
15.26 |
15.10 |
0.00 |
12.50 22-Jan-26 |
15.78 |
15.58 |
0.00 |
16.29 17-Mar-27 |
15.76 |
15.71 |
0.00 |
13.98 23-Feb-28 |
15.85 |
15.76 |
(0.01) |
12.15 18-Jul-34 |
15.71 |
15.59 |
(0.01) |
12.40 18-Mar-36 |
15.65 |
15.55 |
(0.03) |
16.2499 18-Apr-37 |
15.57 |
15.44 |
0.01 |
Source: Zedcrest Dealing
Desk
FGN Bond Auction Result |
||||
Maturity |
Rate (%) |
Offer (N'bn) |
Sub (N'bn) |
Sale (N’bn) |
Apr-23 |
15.25 |
20.00 |
3.25 |
1.05 |
Mar-25 |
15.50 |
15.00 |
7.81 |
3.41 |
Feb-28 |
15.50 |
35.00 |
83.06 |
1.29 |
Treasury Bills
The T-bills market remained slightly bearish in today’s session as
the CBN intervened further with a c.N53bn OMO sale, while system liquidity
opened the day in Negative territory. Yields were higher by c.5bps on the day,
with most selloffs seen on the short end of the curve, whereas there were
slight interest on some mid and long tenors.
We expect yields to remain elevated but with some bargain hunting
expected on the short end of the curve given expectations for c.N492bn in OMO
and PMA repayments tomorrow. The Long end of the curve should however become
slightly pressured, with the CBN expected to intervene with a 364 day offering.
Treasury
Bills |
|||
Description |
Bid (%) |
Offer (%) |
Day Change
(%) |
3-Jan-19 |
15.25 |
15.00 |
0.00 |
14-Feb-19 |
14.50 |
13.75 |
0.00 |
14-Mar-19 |
14.05 |
13.00 |
0.05 |
4-Apr-19 |
14.05 |
12.85 |
0.05 |
2-May-19 |
13.25 |
13.00 |
0.00 |
13-Jun-19 |
13.80 |
12.75 |
0.25 |
18-Jul-19 |
13.80 |
12.75 |
(0.20) |
1-Aug-19 |
14.25 |
14.00 |
0.00 |
12-Sep-19 |
15.00 |
14.75 |
0.00 |
3-Oct-19 |
15.05 |
14.80 |
0.00 |
14-Nov-19 |
14.85 |
14.50 |
0.05 |
5-Dec-19 |
15.05 |
14.85 |
0.05 |
Source: Zedcrest Dealing Desk
Money
Market
Rates in the
money market remained relatively stable, with the OBB and OVN rates closing the
day at 21.71% and 23.07% rates. System liquidity which opened the day in
Negative territory is however estimated to decline further to c.N86bn negative,
due to the OMO sale by the CBN.
We expect rates
to moderate slightly tomorrow, due to c.N492bn inflows expected from OMO and
PMA maturities. The CBN is however
expected to maintain its aggressive stance on systemic liquidity, with rates
expected to significantly worsen toward weekend.
Money Market Rates |
||
|
Current (%) |
Previous (%) |
Open Buy Back (OBB) |
21.71 |
19.33 |
Overnight (O/N) |
23.07 |
21.95 |
Source: FMDQ, Zedcrest
Research
FX Market
At the Interbank, the Naira/USD rate
remained unchanged at N306.95/$ (spot) and N359.24/$ (SMIS), while the NAFEX rate
in the I&E window appreciated marginally by to N364.93/$ from N364.96/$
previously. At the parallel market, the cash and transfer rates remained
unchanged at N365.00/$ and N368.00/$ respectively.
FX Market |
||
|
Current (N/$) |
Previous ( N/$) |
CBN Spot |
306.95 |
306.95 |
CBN SMIS |
359.24 |
359.24 |
I&E FX Window |
364.93 |
364.96 |
Cash Market |
365.00 |
365.00 |
Transfer Market |
368.00 |
368.00 |
Source: CBN, FMDQ, REXEL
BDC
Eurobonds
The NGERIA Sovereigns remained bearish,
with yields ticking further higher by c.5bps, as market players reacted to the
plunge in oil prices and expectation for a rate hike today by the FOMC.
In the NGERIA Corps, the Diambk 19s receded by
c.50ppts from its previous day highs, now 96/97. We witnessed continued
interests on the FBNNL 21s and Zenith 22s, while investors sold off on the
Access 21s Snr.
Related News
1. DMO to offer
N70bn FGN Bonds tomorrow as N100bn FGN Sukkuk Bond Offer Closes
2. Diamond Bank Eurobond Rallies 800bps Following Merger
Announcement
3. Average Yields on Long Term Bills Remain at Over 17.0% on
Aggressive OMO Mop Ups
4. Average Market Rate Rose By 0.69% To Settle At 25.89% As
CBN Continued Its Liquidity Mop Up
5. T-Bills Market Ends Bearish as CBN Conducts Special OMO
Auction
6. Funding Rates
Moderate, as Market Players Undersubscribe CBN OMO
7. Bond Yields Pare Losses amid Renewed Local Demand
8. Invest in FGN Monthly Bond Auction – December 2018
System Liquidity Falls To Negative Territory Amid
Continued OMO Auctions