CBN Holds Off on OMO Sale as Funding Rates Moderate

Proshare

Tuesday, February 12,  2019  08:10 PM / Zedcrest Capital

***Oil Jumps As Saudis Plan Further Production Cuts***

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 15th Consecutive Time at the Jan. 22, 2019 MPC Meeting

External Reserves

$42.90bn

As at February 11, 2019. A c.0.12% decrease from $42.95bn on February 8, 2019

Brent Crude

$62.55pb

As at February 12, 2019. A c.0.97% increase from $61.95pb on February 11, 2019

 

Bonds

The Bond market traded on a slightly bearish note on the back of continued profit taking mostly on the 2028s, while bids got weaker across the curve, as market sentiments dampened in anticipation of the February Bond auction scheduled to hold next week.

 

We expect yields to remain slightly bearish into the new week, with possibility for a further uptick in yields closer to the 15% mark.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.98

14.16

(0.06)

14.50 15-Jul-21

14.99

14.58

0.00

16.39 27-Jan-22

14.87

14.33

(0.02)

14.20 14-Mar-24

14.59

14.19

0.03

12.50 22-Jan-26

14.73

14.55

(0.01)

16.29 17-Mar-27

14.75

14.58

(0.02)

13.98 23-Feb-28

14.82

14.77

(0.11)

12.15 18-Jul-34

14.65

14.53

(0.04)

12.40 18-Mar-36

14.68

14.59

(0.06)

16.2499 18-Apr-37

14.51

14.39

(0.06)

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market remained slightly bearish on the back of the liquidity squeeze in the money market which caused yields to tick marginally higher by c.5bps on the day. The CBN also floated a further OMO auction with market players bidding for c.N22bn of the N65bn offered. The CBN however held off on sales, most likely due to the significant funding constraints in the system.

The CBN will conduct an NTB Auction on behalf of the FG tomorrow, with c.N154bn of the 91, 182 and 364-day bills on offer. Given expectations by market players for continued OMO auctions by the CBN, we do not expect any significant changes in stop rates from previous levels.

NTB Auction Expectations

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

3.38

10.90 - 11.20

11.00

182 days

10.00

13.40 - 13.70

13.50

364 days

140.00

14.90 - 15.20

15.00

Source: Zedcrest Research

 

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Feb-19

12.30

12.00

0.30

14-Mar-19

12.50

11.25

0.50

4-Apr-19

11.50

11.25

0.15

2-May-19

12.00

11.00

0.50

13-Jun-19

13.00

12.00

0.00

18-Jul-19

12.95

12.65

0.00

1-Aug-19

14.50

14.25

0.00

12-Sep-19

14.80

14.50

0.00

3-Oct-19

14.95

14.75

0.05

14-Nov-19

14.95

14.70

0.00

5-Dec-19

15.00

14.90

0.05

2-Jan-20

15.00

14.90

0.00

Source: Zedcrest Dealing Desk

 

Money Market

Rates in the money market moderated by c.20pct as banks were able to access the CBN’s SLF window to fund their obligations, while the CBN also held off on a further OMO sale in a bid to alleviate the significant funding pressures in the system. The OBB and OVN rates consequently ended the session at 24.17% and 27.50% respectively.

We expect rates to remain elevated tomorrow, as there are no significant inflows expected.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

24.17

43.33

Overnight (O/N)

27.50

47.50

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, the Naira/USD rate depreciated by 0.02% to N306.75/$ at the spot market, while the SMIS rate remained unchanged at N357.10/$. The NAFEX rate in the I&E window however appreciated by c.0.02% to N361.87/$. At the parallel market, the cash rate depreciated by c.0.28% to N360.00/$ while the transfer rate remained unchanged at N365.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.75

306.70

CBN SMIS

357.10

357.10

I&E FX Window

361.87

361.95

Cash Market

360.00

359.00

Transfer Market

365.00

365.00

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

Renewed interests in the NGERIA Sovereigns push yields lower by c.14bps, with the rally mostly fostered by the positive gains in oil market following plans by the Saudi Government to implement further production cuts.

 

In the NGERIA Corps, investors remained slightly bearish on the UBANL 22s, whilst yields remained relatively flat on other tickers.

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

 

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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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