Investors Rally Nigerian Eurobonds as Oil Prices Push Higher

Proshare

Saturday, January 06, 2018/ 07:30AM / Zedcrest Capital

***Brent Crude Surges in Best Week since 2016 as U.S. Economy Shines *** – Bloomberg

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

$43.06bn

As at January 3, 2018. A c.0.05% decrease from $43.08bn on January 2, 2018

Brent Crude

$57.06pb

As at January 4, 2019. A c.2.87% increase from $55.47pb on January 3, 2018

 

Bonds

Having retraced sharply by c.18bps in the first trading session of the year, yields in the bond market moderated in the last two days of the week, declining by c.8bps on Friday amid renewed interests by clients mostly on the long end of the curve which compressed by c.20bps on the day. The spike in the yield curve consequently moderated to c.12bps (15.42%) from their closing levels of c.15.30% in the previous year.

 

We expect the market to remain well bid in the near term, due to the shortage of supply of bonds owing to the scanty issuance at the last auction. We have also witnessed increased demand for higher yielding Non-FGN Bonds, and we expect this to persist in the near term, as we await more clarity from issuance of the Q1 FGN Bond Calendar by the DMO.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.24

14.63

0.00

14.50 15-Jul-21

15.58

15.26

(0.15)

16.39 27-Jan-22

15.12

14.71

0.00

14.20 14-Mar-24

15.12

14.75

(0.05)

12.50 22-Jan-26

15.66

15.34

(0.02)

16.29 17-Mar-27

15.55

15.33

(0.04)

13.98 23-Feb-28

15.61

15.41

(0.08)

12.15 18-Jul-34

15.40

15.22

(0.24)

12.40 18-Mar-36

15.50

15.22

(0.19)

16.2499 18-Apr-37

15.37

15.17

(0.12)

Source: Zedcrest Dealing Desk 

 

Treasury Bills

The T-bills market remained slightly bearish with yields rising higher by c.5bps, as system liquidity was significantly compressed by debits for the Retail FX intervention by the CBN. We witnessed continued selloffs on the shorter tenured maturities while yields moderated marginally by c.5bps on the longer end of the curve, in the absence of an OMO auction by the CBN.

We expect yields to remain pressured in the coming week, as the CBN is expected to maintain its spate of OMO and FX interventions in the market.

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Feb-19

15.75

14.60

0.25

14-Mar-19

15.00

14.00

0.00

4-Apr-19

12.35

12.00

(0.15)

2-May-19

14.00

13.25

1.00

13-Jun-19

13.60

13.40

0.10

18-Jul-19

13.60

13.50

(0.40)

1-Aug-19

14.50

13.60

0.00

12-Sep-19

15.00

14.65

0.00

3-Oct-19

14.90

14.75

(0.10)

14-Nov-19

14.85

14.75

(0.05)

5-Dec-19

15.00

14.90

(0.05)

Source: Zedcrest Dealing Desk

  

 

Money Market

Rates in the money market rose by c.7pct, with the OBB and OVN rates closing the week at 20.00% and 23.75% respectively. This came on the back of debits for the Retail FX intervention by the CBN which is estimated to have mopped up c.N250bn from system liquidity which opened the day at c.N265bn positive.

We expect rates to remain elevated opening the week, as the CBN is expected to resume its OMO and wholesale FX interventions.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

20.00

14.08

Overnight (O/N)

23.75

14.92

Source: FMDQ, Zedcrest Research 

 

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (spot) and N358.13/$ (SMIS), while the NAFEX rate in the I&E window depreciated further by c.0.01% to N365.35/$ from N365.30/$ previously. At the parallel market, the cash rate appreciated slightly by c.0.03% to N358.90/$, while the transfer rate remained unchanged at N364.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

358.31

358.31

I&E FX Window

365.35

365.30

Cash Market

358.90

359.00

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

Having opened the year on a relatively calm note, investors rallied the NGERIA Sovereigns by c.30bps in the last trading session of the week, as market sentiment was bolstered by the c.3% uptick in oil price and reinvestment of cash flows by both local and foreign portfolio managers.

 

The NGERIA Corps trade on a relatively calmer note, but investors remained bullish on the ACCESS 21s Snr and UBANL 22s which declined by c.20bps on the day.

 

 

 

Proshare Nigeria Pvt. Ltd.

 

 

 Proshare Nigeria Pvt. Ltd. 

 

 

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5.      Naira Crashes Below N360 Per Dollar at the Parallel Market as External Reserves Resume Downtrend

6.      Demand Pressures Force c.50bps Rally on 2024 FGN Bond

7.      Money Market Rate Decreased As Overnight Rate Fell to 25.08%

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