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NAFEX Rate Weakens as Turnover Dips to c.$100m

Bonds & Fixed Income	4050 VIEWS
Bonds & Fixed Income
4050 VIEWS

Monday, March 18, 2019 07:40 PM / Zedcrest Capital

***Nigeria spends $500m annually on palm oil importation *** - CBN

KEY INDICATORS

Indicator	Value	Commentary
Inflation	11.31%	As at March 15, 2019. A c.6bps decline from 11.37% recorded in January 2019
MPR	14.00%	Left Unchanged for the 15^th Consecutive Time at the Jan. 22, 2019 MPC Meeting
External Reserves	$43.05bn	As at March 15, 2019. A c.0.14% increase from $42.99bn on March 14, 2019
Brent Crude	$67.45pb	As at March 18, 2019. A c.0.10% increase from $66.98pb on March 15, 2019

Bonds

We witnessed mild buying interests in the FGN bond market following inflows of c.N50bn from coupon payment on the 2027 bond. Yields were however relatively flat, with a marginal compression of c.1bp on the day.

We expect the market to remain relatively flat in the near term, due to the recent slowdown in demand interests from RM clients. The market is also likely to tilt to a slightly bearish stance ahead of the FGN bond auction to be held next week.

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
14.50 15-Jul-21	14.71	14.29	(0.02)
16.39 27-Jan-22	14.58	14.28	0.00
12.75 27-Apr-23	14.55	14.43	(0.07)
14.20 14-Mar-24	14.40	14.05	0.03
13.53 23-Mar-25	14.54	14.37	(0.07)
12.50 22-Jan-26	14.40	14.30	(0.03)
16.29 17-Mar-27	14.36	14.26	(0.08)
13.98 23-Feb-28	14.35	14.23	0.01
12.15 18-Jul-34	14.37	14.15	0.03
12.40 18-Mar-36	14.30	14.14	0.04
16.2499 18-Apr-37	14.22	14.10	0.01

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market traded on a relatively calm note and was mostly order driven in absence of an OMO auction by the CBN. Yields consequenlty compressed marginally by c.1bp to 13.30% on average.

We expect T-bill Yields to remain relatively stable, barring a renewed OMO sale by the CBN tomorrow. Market players are also expected to cherrypick on some relatively attractive bills, in anticipation of client demand for the PMA scheduled for Wednesday.

Benchmark Treasury Bills
Description	Bid (%)	Offer (%)	Day Change (%)
4-Apr-19	13.00	10.00	0.00
2-May-19	11.55	10.00	0.15
13-Jun-19	11.70	11.50	0.05
18-Jul-19	12.50	12.00	0.00
1-Aug-19	12.10	11.95	0.00
12-Sep-19	13.15	13.00	(0.05)
3-Oct-19	13.20	13.00	0.00
14-Nov-19	13.20	13.00	(0.05)
5-Dec-19	13.00	12.90	(0.20)
2-Jan-20	13.00	12.80	0.00
6-Feb-20	12.85	12.55	0.10

Source: Zedcrest Dealing Desk

Money Market

Rates in the money market remained relatively unchanged as inflows from coupon payments (c.N50bn) cushioned the effects of today’s wholesale FX auction, with system liquidity estimated to have closed the session at c.N75bn positive. The OBB and OVN rates consequently ended the session at 10.58% and 11.58% respectively.

We expect rates to remain relatively stable tomorrow, barring a renewed OMO sale by the CBN.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	10.58	11.17
Overnight (O/N)	11.58	11.67

Source: FMDQ, Zedcrest Research

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (Spot) and N356.92/$ (SMIS). The NAFEX closing rate in the I&E window however weakened by 0.02% to N360.61/$, as market turnover fell by c.78% to $101m. At the parallel market, the cash rate improved slightly to N357.80/$, while the transfer rate remained unchanged at N364.00/$.

FX Market
	Current (N/$)	Previous ( N/$)
CBN Spot	306.95	306.95
CBN SMIS	356.92	356.92
I&E FX Window	360.61	360.18
Cash Market	357.80	358.00
Transfer Market	364.00	364.00

Source: CBN, FMDQ, REXEL BDC

Eurobonds

The NGERIA Sovereigns remained firmly bullish, with yields trending lower by c.11bps on the day. We witnessed the most interests around the mid tenors (25s – 31s) which gained about 0.50pct on the day.

In the NGERIA Corps, we witnessed renewed interests on the UBANL 22s, following the relatively positive results from its 2018 published financial report. We also witnessed firm interests on the FIDBAN 22s which gained c.0.20pct on the day.