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CBN Signals Market With Another Cut In Omo Rate

Bonds & Fixed Income	3893 VIEWS
Bonds & Fixed Income
3893 VIEWS

Friday, November 24, 2017 9:18AM/ Zedcrest Capital

Table 1:Key Indicators

Inflation	15.91%	Declined by 0.07% in October from 15.98% in September 2017
MPR	14.00%	Left unchanged at 14.00% at the MPC meeting of November 2017
External Reserves	$34.43billion	Accreted by 2.04% as at 21^st November from $34.41bn on 20^th November 2017
Brent Crude	$62.80pb	Rose by 0.18% from $62.69pb on 21^st November 2017

Bonds

The bond market was relatively quiet today, as market players stayed cautious in the absence of any significant client demand. Market activity was however centered on the 2027 bonds, as some profit taking on the bond took its yield slightly above its auction rate to 14.85% (bid). Average bond yields consequently rose by 4bps to 14.65% from 14.61% in the previous session. We expect the market to be relatively quiet tomorrow, barring any renewed profit taking activity by market players.

Table 2:Benchmark FGN Bond Yields
Description	Bid (%)	Offer (%)	Day Change (%)
16.00 29-Jun-19	14.77	14.70	0.22
15.54 13-Feb-20	14.58	14.51	0.16
14.50 15-Jul-21	14.83	14.76	0.06
16.39 27-Jan-22	14.42	14.35	(0.08)
14.20 14-Mar-24	14.80	14.73	0.07
12.50 22-Jan-26	14.75	14.68	0.02
16.29 17-Mar-27	14.85	14.78	0.07
12.15 18-Jul-34	14.52	14.45	(0.09)
12.40 18-Mar-36	14.55	14.48	0.00
16.25 18-Apr-37	14.45	14.38	0.00

Source: Zedcrest Dealing Desk

Treasury Bills
The T-bills market was slightly bullish today, with slight buys on the short and medium end of the curve, as market liquidity was bolstered by OMO maturity inflows of c.N200bn. The OMO auction by the CBN was well over subscribed to the tune of N133bn on the 210-day bill offered. The CBN however sold only N2.068bn of the 91-day and N51.96billion of the 210-day bill, as it cut its auction stop rate by another 5bps for the second day in a row, with rates clearing at 15.95% and 17.70% on the two bills respectively. We expect the market to be slightly bullish tomorrow, as market players will look to cover some lost bids from the auction.

Table 3: Benchmark Treasury Bills Rates
Description	Bid (%)	Offer (%)	Day Change (%)
7-Dec-17	15.60	15.35	(0.40)
4-Jan-18	16.55	16.30	0.35
1-Feb-18	16.80	16.55	(0.20)
1-Mar-18	16.00	15.75	(0.35)
5-Apr-18	17.00	16.75	0.05
3-May-18	17.60	17.35	0.00
14-Jun-18	17.55	17.30	(0.05)
5-Jul-18	17.50	17.25	0.00
2-Aug-18	16.75	16.50	0.00
13-Sep-18	15.00	14.75	0.00
4-Oct-18	15.25	15.00	0.00

Source: Zedcrest Dealing Desk

Table 4: OMO - 23 November 2017
Tenor	Rate (%)	Offer (NBn)	Sub (N'bn)	Sale (N'bn)
91 day	15.95	30.00	2.07	2.07
210 day	17.75	70.00	133.06	51.96

Source: CBN

Money Market

The OBB and OVN rates fell significantly to 11.83% and 11.96% from c.28% levels the previous day. This was as a result of the cash inflows from OMO maturities by the CBN. System liquidity is consequently estimated to close today at N27bn positive, from a negative opening figure of N120bn. We expect rates to trend northwards tomorrow, as system liquidity is estimated to get tighter due to expected debits for bond auction settlement and further OMO T-bill sales by the CBN.

Table 5: Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	11.83	27.17
Overnight (O/N)	11.96	29.17

Source: FMDQ, Zedcrest Research

FX Market

The CBN Official spot rate appreciated slightly by 0.02% to N305.85/$ from its previous day rate of N305.90/$. Its external reserves is also recorded to have improved by 2.04% to $34.43billion as at 21^st of November 2017. Rates at the Investors and exporters FX window closed at N360.27/$ from N360.65/$ in the previous session. Rates at the parallel market also appreciated to N361.80/$ from its previous day rate of N362.10/$.