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NAFEX Rate Appreciates to Six Month High Amid Renewed FPI Inflows

Bonds & Fixed Income	5076 VIEWS
Bonds & Fixed Income
5076 VIEWS

Thursday, February 07, 2019 07:40 PM / Zedcrest Capital

*** Oil Slips As Investors Weigh Up Supply Factors***

KEY INDICATORS

Indicator	Value	Commentary
Inflation	11.44%	As at January 16, 2019. A c.16bps increase from 11.28% recorded in November 2018
MPR	14.00%	Left Unchanged for the 15^th Consecutive Time at the Jan. 22, 2019 MPC Meeting
External Reserves	$42.99bn	As at February 6, 2019. A c.0.07% decrease from $43.02bn on February 5, 2019
Brent Crude	$62.33pb	As at February 7, 2019. A c.0.45% decrease from $62.61pb on February 6, 2019

Bonds

The Bond market traded on a significantly bullish note with yields compressing by further by c.9bps, following increased demand on the mid to long end of the curve from both local and offshore investors.

Market sentiment has turned bullish since the January FGN Bond auction, with yields having compressed by c.30bps to date. Whilst we expect the buying interests to persist, we anticipate a slight reversal in yields towards month end.

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
15.54 13-Feb-20	15.04	14.43	(0.11)
14.50 15-Jul-21	15.04	14.86	(0.03)
16.39 27-Jan-22	14.88	14.33	(0.02)
14.20 14-Mar-24	14.71	14.29	(0.05)
12.50 22-Jan-26	14.85	14.70	(0.10)
16.29 17-Mar-27	14.93	14.77	(0.10)
13.98 23-Feb-28	15.01	14.89	(0.11)
12.15 18-Jul-34	14.92	14.71	(0.07)
12.40 18-Mar-36	14.85	14.73	(0.17)
16.2499 18-Apr-37	14.82	14.68	(0.16)

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market remained slightly bearish as the CBN floated another OMO auction which was significantly oversubscribed by market players especially on the 364-day bill offered. The CBN consequently sold a total of c.N321bn of the N250bn offered as it looked to mop up the c.N315bn in maturing OMO bills.

We expect yields to close the week on a relatively flat note, with the CBN expected to sustain its OMO interventions in the market tomorrow.

Treasury Bills
Description	Bid (%)	Offer (%)	Day Change (%)
14-Feb-19	13.50	12.35	0.50
14-Mar-19	13.50	11.25	1.75
4-Apr-19	12.00	10.00	1.00
2-May-19	11.15	11.00	0.15
13-Jun-19	12.95	10.00	1.25
18-Jul-19	13.75	12.40	0.75
1-Aug-19	13.30	13.20	0.05
12-Sep-19	14.75	14.40	0.05
3-Oct-19	14.90	14.50	0.05
14-Nov-19	14.95	14.85	0.05
5-Dec-19	15.00	14.75	0.05
2-Jan-20	15.00	14.75	0.00

Source: Zedcrest Dealing Desk

Money Market

Rates in the money market remained elevated as inflows from OMO maturities were completely mopped up by a further OMO sale by the CBN. The OBB and OVN rates consequently ended the session marginally lower at 17.33% and 18.42% respectively.

We expect rates to remain elevated closing the week, as there are no significant inflows anticipated.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	17.33	20.67
Overnight (O/N)	18.42	21.83

Source: FMDQ, Zedcrest Research

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.70/$ (spot) and N357.10/$ (SMIS). The NAFEX rate in the I&E window appreciated further by c.0.02% to a six month high of N361.64/$ amid renewed inflows from offshore investors and exporters since the start of the new month. At the parallel market, the cash rate depreciated by c.0.28% to N359.20/$, while the transfer rate remained unchanged at N365.00/$.

FX Market
	Current (N/$)	Previous ( N/$)
CBN Spot	306.70	306.70
CBN SMIS	357.10	357.10
I&E FX Window	361.64	361.72
Cash Market	359.20	358.20
Transfer Market	365.00	365.00

Source: CBN, FMDQ, REXEL BDC

Eurobonds

The NGERIA Sovereigns pulled back gains in today’s session, with yields trending higher by c.9bps on average, as some investors lightened their holdings in view of the strengthening of the US dollar.

In the NGERIA Corps, yields were relatively flat across board, except for slight selloff on the DIAMBK 19s.

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