| Bonds & Fixed Income |     4267 VIEWS  |
| Bonds & Fixed Income | |
| 4267 VIEWS | |
 |
Saturday, December 29, 2018/ 07:04AM / Zedcrest Capital
***Manufacturing PMI Expands for 21st
Consecutive Month*** - CBN
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 |
$43.23bn |
As at December 27, 2018. A c.0.14% decrease from $43.29bn on
December 24, 2018 |
|
Brent Crude |
$52.99pb |
As at December 24, 2018. A c.0.49% increase from $52.73pb on December 21, 2018 |
Bonds
Having rallied by c.10bps in the
previous session, the Bond market traded on a much calmer note today, with
demand on the 2036s compressing yields marginally by c.1bp on average.
We note that the recent rally on
the FGN bonds by c.30bps post the December Bond Auction has been largely driven
by Institutional client demand, coming on the back of the paltry Bond Auction
sale (N5.7bn) by the DMO, given that they had successfully raised c.N100bn
earlier via a 7yr Sukuk Bond offering.
Given the aforementioned, we
maintain a bearish outlook on bonds at these levels, with expectations for
reversal in yields upon release of the Q1 2019 FGN Bond Calendar, which we
believe should contain a sizeable amount of Bonds on offer.
|
Benchmark
FGN Bonds |
|||
|
Description |
Bid (%) |
Offer (%) |
Day Change
(%) |
|
15.54 13-Feb-20 |
15.13 |
14.14 |
0.00 |
|
14.50 15-Jul-21 |
15.35 |
15.23 |
(0.25) |
|
16.39 27-Jan-22 |
15.02 |
14.43 |
0.00 |
|
14.20 14-Mar-24 |
14.34 |
14.20 |
(0.04) |
|
12.50 22-Jan-26 |
15.59 |
15.08 |
(0.01) |
|
16.29 17-Mar-27 |
15.45 |
15.21 |
0.02 |
|
13.98 23-Feb-28 |
15.62 |
15.22 |
0.04 |
|
12.15 18-Jul-34 |
15.49 |
15.10 |
0.11 |
|
12.40 18-Mar-36 |
15.51 |
15.27 |
(0.02) |
|
16.2499 18-Apr-37 |
15.49 |
15.26 |
0.02 |
Source: Zedcrest Dealing Desk
Treasury
Bills
The
T-bills market remained slightly bearish given the significant OMO Sale
(c.N1trn) by the CBN in the previous session. We witnessed the most weakness on
the short tenors (Jan – Apr) which rose by c.120bps as market players sought to
bolster their year-end cash positions.
We
anticipate a relatively quiet trading session tomorrow, as market players wind
up activities for the year.
|
|
|||
|
Description |
Bid (%) |
Offer (%) |
Day Change
(%) |
|
3-Jan-19 |
17.50 |
16.50 |
0.75 |
|
14-Feb-19 |
15.75 |
14.50 |
0.75 |
|
14-Mar-19 |
15.50 |
13.00 |
1.75 |
|
4-Apr-19 |
14.50 |
13.00 |
1.55 |
|
2-May-19 |
15.00 |
13.25 |
0.00 |
|
13-Jun-19 |
13.60 |
13.35 |
0.00 |
|
18-Jul-19 |
15.00 |
13.50 |
1.10 |
|
1-Aug-19 |
14.50 |
13.50 |
(0.50) |
|
12-Sep-19 |
15.00 |
14.75 |
0.00 |
|
3-Oct-19 |
15.00 |
14.20 |
0.00 |
|
14-Nov-19 |
14.90 |
14.00 |
0.15 |
|
5-Dec-19 |
14.95 |
14.85 |
(0.05) |
Source:
Zedcrest Dealing Desk
Money
Market
Rates in the
money market rose by c.5pct with the OBB and OVN rates closing the day at
17.17% and 18.42%, as the CBN debited banks for the special OMO auction
(c.N645bn) conducted yesterday. We consequently estimate system liquidity to
drop to a repo of c.N290bn from a positive opening level of c.N355bn.
We expect rates
to remain elevated due to the relatively tighter level of system liquidity and
possibility for a wholesale FX intervention by the CBN on Monday.
|
Money Market Rates |
||
|
|
Current (%) |
Previous (%) |
|
Open Buy Back (OBB) |
17.17 |
12.50 |
|
Overnight (O/N) |
18.42 |
13.25 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank, the Naira/USD rate
remained unchanged at N307.00/$ (spot) and N359.24/$ (SMIS), while the NAFEX rate
in the I&E window depreciated by c.0.07% to N364.50/$ from N364.25/$
previously. Value traded at the I&E FX window decreased by c.47.34%
day-on-day, with a total trade turnover of $211.48mm traded in 319 deals, with
rates ranging between N358.00/$ - N365.50/$.
There was continued appreciation
of the Naira at the parallel market, with the cash rate appreciating further by
c.0.47% to N359.50/$, while the transfer rate weakened slightly by c.0.14% to
N366.00/$.
Having increased consistently
from c.$41.52bn on 22-Nov to c.$43.29bn on 24-Dec, (given the accretion from
the FGN’s Eurobond’s Issuance), the reserves have now resumed its downtrend
posting a c.0.14% decline to c.$43.24bn as at 27-Dec, on the back of the
continued FX interventions by the CBN at the Interbank and Parallel Market
segments.
|
FX Market |
||
|
|
Current (N/$) |
Previous ( N/$) |
|
CBN Spot |
307.00 |
307.00 |
|
CBN SMIS |
358.31 |
359.24 |
|
I&E FX Window |
364.50 |
364.25 |
|
Cash Market |
359.50 |
361.20 |
|
Transfer Market |
366.00 |
365.50 |
Source: CBN, FMDQ, REXEL
BDC
Eurobonds
The NGERIA Sovereigns remained relatively
stable, with only slight sell witnessed on some long tenured maturities, which rose
by c.2bps on the day.
Investors
remained slightly bearish on the NGERIA
Corps, with continued selling interests seen mostly on the ACCESS and FBNNL
21s, whereas there were slight interests on the UBANL and FIDBAN 22s.
Related News
1. Demand Pressures
Force c.50bps Rally on 2024 FGN Bond
2. Money Market Rate Decreased As Overnight Rate Fell to
25.08%
3. Markets Close on a Quiet Note as Tight System Liquidity
pushes Funding Rates Higher
4. Investors Look To Secondary Market To Fill Unmet Demand At
Previous Day’s Auction
5. Summary of December 2018 FGN Bond Auction Results
6. DMO’s Weak Borrowing Appetite Forces 10-yr Auction Rate
33bps Lower
7. DMO to offer N70bn FGN Bonds tomorrow as N100bn FGN Sukkuk
Bond Offer Closes
8. Diamond Bank Eurobond Rallies 800bps Following Merger
Announcement
9. Average Yields on Long Term Bills Remain at Over 17.0% on
Aggressive OMO Mop Ups
10. Average Market Rate Rose By 0.69% To Settle At 25.89% As
CBN Continued Its Liquidity Mop Up
11. T-Bills Market Ends Bearish as CBN Conducts Special OMO
Auction
12. Funding Rates Moderate, as Market Players Undersubscribe
CBN OMO
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