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Inflation Figures Hit A Three-Month High as Money Market Rates Drop to Single Digits

Bonds & Fixed Income	782 VIEWS
Bonds & Fixed Income
782 VIEWS

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Wednesday, October 16, 2019 / 10:43 AM / By Zedcrest Capital / Header Image Credit: Financengr

Below are highlights of trading activities in the fixed income and forex market on October 15, 2019

Bonds

The Bond market traded on a cautious note, with mixed sentiments noted on across the curve. We noted buying interests at the short- (2022s) and long-end (2034s) of the curve, while the mid-end (2025s) were sold-off in the day's trading session. Yields consequently closed higher by c.1bp on the average across the benchmark bond curve.

With inflations figures inching up by 22bps from the previous, we expect a cautious opening to tomorrow's trading session as investors continue to evaluate the real return on their portfolios.

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
14.50 15-Jul-21	14.32	13.47	0.02
16.39 27-Jan-22	14.16	13.72	0.01
12.75 27-Apr-23	14.40	14.28	0.02
14.20 14-Mar-24	14.19	13.72	0.01
13.53 23-Mar-25	14.34	14.18	0.10
12.50 22-Jan-26	14.38	14.28	0.00
16.29 17-Mar-27	14.27	14.10	0.00
13.98 23-Feb-28	14.39	14.28	0.00
12.15 18-Jul-34	14.53	14.34	0.00
12.40 18-Mar-36	14.49	14.31	(0.04)
16.2499 18-Apr-37	14.52	14.43	(0.03)
14.80 26-Apr-49	14.67	14.59	0.00

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market traded bullish across the short- to mid-end of the NTBills curve, while yields on the long-end retraced higher. We noted significant demand on some December - February maturities, as market players position ahead of the PMA to hold tomorrow. We however also noted a slowdown of the demand for maturities at the long-end due to the prospect of higher yields at the coming PMA, most notably the October maturities which closed higher by c.15bps.

We expect a quiet market as market participants shift focus to the Primary Market Auction coming up tomorrow.

Benchmark Treasury Bills
Description	Bid (%)	Offer (%)	Day Change (%)
14-Nov-19	11.20	10.00	(1.10)
5-Dec-19	11.70	11.10	(0.60)
2-Jan-20	12.00	11.05	(0.50)
6-Feb-20	12.50	11.00	0.00
19-Mar-20	12.00	11.00	(0.50)
2-Apr-20	11.75	11.25	(0.75)
14-May-20	12.80	11.50	0.00
04-Jun-20	12.75	11.60	0.25
02-Jul-20	12.85	12.20	0.00
13-Aug-20	12.85	12.30	0.00
3-Sep-20	12.70	12.30	(0.15)
1-Oct-20	12.90	12.35	0.05

Source: Zedcrest Dealing Desk

Money Market

Money market rates crashed by an average of c.700bps from yesterday's close. Market liquidity figures opened with c.N250bn, with FX auction refunds providing some respite to system liquidity levels. OBB and OVN rates closed today at 8.43% and 9.14% respectively.

We expect rates to remain stable at single digits, with no expected outflows being provided for by banks.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	8.43	16.00
Overnight (O/N)	9.14	16.79

Source: FMDQ, Zedcrest

FX Market

The Naira/USD remained stable at the interbank, as the Naira/USD spot and SMIS rates remained stable at N306.95/$ and N358.13/$ respectively. At the I&E FX window, depreciated by 50k the previous day.

The cash and transfer rates at the parallel markets also remained stable, closing unchanged at N358.00/$ and N362.50/$ respectively.

FX Market
	Current (N/$)	Previous ( N/$)
CBN Spot	306.95	306.95
CBN SMIS	358.13	358.13
I&E FX Window	362.63	362.13
Cash Market	358.00	358.00
Transfer Market	362.50	362.50

Source: CBN, FMDQ, REXEL BDC

Eurobonds

The NGERIA Sovereigns had a quiet trade session for the second day this week with little activity witnessed. Brent crude prices further dipped from yesterday by 0.64%, but had little effect across the sovereign curve.

We had an active NIGERIA Corps trade session, we noted a sell-off at the short- to mid-end dated papers, especially UBANL 2022 which lost an average of c.19bps.