Escalating US-China Trade Tensions Weigh on Market Sentiments

Monday, May 13, 2019   /  07:00PM  / Zedcrest Capital / Header Image Credit: People's Pundit Daily

The NGERIA Sovereigns turned bearish in today’s session, on the back of the escalated tensions between the US and China, which culminated in retaliatory Tariff measures by the Chinese government; following President Trump’s increase in tariffs on Chinese goods last Friday.

Below are highlights from activities within the Fixed Income and FX market today.

Bonds

The Bond market opened the week on a relatively note, with yields marginally higher by c.1bp on the day, as demand interests were relatively muted compared to activities in the previous session. 

We believe yields have found some support at current levels, given the risk off stance on EM assets from the continued US-China trade spat. We consequently expect yields to be relatively stable, with slight profit taking expected in the near term.

Benchmark FGN Bonds
 
Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market remained bullish, despite slight uptick on the short end of the curve. This came on the back of an absence of an OMO auction which caused yields to decline further by c.5bps on the mid to long end of the curve.

We expect yields to remain relatively stable in absence of a renewed OMO auction by the CBN.

Benchmark Treasury Bills

Source: Zedcrest Dealing Desk 

Money Market

The OBB and OVN rates spiked higher by c.6pct due to the Wholesale FX auction by the CBN which further drained system liquidity, now estimated at c.N40bn positive. The OBB and OVN rates consequently ended the session at 16.00% and 16.71% respectively.

We expect rates to remain relatively unchanged tomorrow, as there are no significant inflows anticipated.

Money Market Rates

Source: FMDQ, Zedcrest Research 

FX Market

At the Interbank, the Naira/USD rate decreased marginally by 0.02% to N306.95/$ at the spot market, while the SMIS rate remained unchanged at N356.60/. The NAFEX closing rate in the I&E window declined marginally by 0.01% to N360.83/$, whilst market turnover fell by 55% to $165m. At the parallel market, the cash rate rose by c.0.06% to N359.00/$, while the transfer rate remained unchanged at N363.50/$. 

Source: CBN, FMDQ, REXEL BDC 

Eurobonds

The NGERIA Sovereigns turned bearish in today’s session. Yields were consequently higher by c.10bps on the day, with the heaviest losses on the 2047s which lost c.1pct on the day. 

In the NGERIA Corps, we witnessed renewed demand interests on the FIDBAN 22s and ETINL 24s and slight gains on the ACCESS, FBNNL and ECOTRA 21s.

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