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T-Bills Market Trades Bearish as Market Players anticipate Retail FX Funding

Bonds & Fixed Income	1528 VIEWS
Bonds & Fixed Income
1528 VIEWS

Friday, January 04, 2018/ 06:18AM / Zedcrest Capital

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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 12^th Consecutive Time at the Nov. 22, 2018 MPC Meeting
External Reserves	$43.07bn	As at January 2, 2018. A c.0.07% decrease from $43.12bn on December 31, 2018
Brent Crude	$55.47pb	As at January 3, 2019. A c.0.00% decrease from $55.51pb on January 2, 2018

Bonds

The Bond Market compressed marginally by c.3bps in today’s session, following slight interests on the 26s, 27s and 37s. Yields however remained much unchanged on other maturities.

We expect the market to close the week on a relatively quiet note, with an outlook for relatively higher yield levels in the coming week.

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
15.54 13-Feb-20	15.24	14.73	(0.05)
14.50 15-Jul-21	15.73	15.43	0.01
16.39 27-Jan-22	15.12	14.77	0.00
14.20 14-Mar-24	15.17	14.95	0.00
12.50 22-Jan-26	15.68	15.63	(0.07)
16.29 17-Mar-27	15.59	15.51	(0.04)
13.98 23-Feb-28	15.69	15.54	0.00
12.15 18-Jul-34	15.64	15.40	(0.01)
12.40 18-Mar-36	15.69	15.42	(0.01)
16.2499 18-Apr-37	15.49	15.38	(0.08)

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market traded on a bearish note with yields rising by c.12bps on average, following sell pressures on the shorter end of the curve in the wake of the OMO auction (c.425bn) by the CBN.

We expect the market to remain bearish tomorrow, as market players would be looking to provide funding for a retail FX intervention sale by the CBN.

Treasury Bills
Description	Bid (%)	Offer (%)	Day Change (%)
14-Feb-19	15.50	13.00	0.00
14-Mar-19	17.00	14.50	0.00
4-Apr-19	13.50	11.00	0.00
2-May-19	13.00	12.50	0.00
13-Jun-19	13.50	12.50	0.00
18-Jul-19	14.00	13.00	0.00
1-Aug-19	14.50	14.00	0.00
12-Sep-19	15.00	14.00	0.00
3-Oct-19	15.00	14.00	0.00
14-Nov-19	14.90	14.60	0.00
5-Dec-19	15.05	14.90	0.00

Source: Zedcrest Dealing Desk

Money Market

Rates in the money market declined by c.4pct, with the OBB and OVN rates closing the day at 14.08% and 14.92%, as inflows from Net OMO and PMA repayments (c.N265bn) bolstered system liquidity to c.N385bn est. from c.N120bn opening the day.

Rates are expected to trend higher tomorrow, as the CBN is expected to debit banks for a retail FX interventions sale which estimated to mop up most of the available system liquidity.

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	14.08	18.33
Overnight (O/N)	14.92	19.42

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.0.24% to N365.30/$ from N364.41/$ previously. At the parallel market, the cash rate depreciated slightly by c.0.06% to N359.00/$, while the transfer rate remained unchanged at N364.00/$.

FX Market
	Current (N/$)	Previous ( N/$)
CBN Spot	306.95	306.95
CBN SMIS	358.31	358.31
I&E FX Window	365.30	364.41
Cash Market	359.00	358.80
Transfer Market	364.00	364.00