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Money Market Rates Compress Further As CBN Stays Mute on OMO

Bonds & Fixed Income	4264 VIEWS
Bonds & Fixed Income
4264 VIEWS

Tuesday, April 2, 2019 07:32 AM / Zedcrest Capital

***Oil Hits 2019 High as Demand Outlook Brightens***

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	13.50%	Cut by 50bps to 13.50% at the Mar. 26, 2019 MPC Meeting
External Reserves	$44.34bn	As at March 28, 2019. A c.0.23% increase from $44.24bn on March 27, 2019
Brent Crude	$69.01pb	As at April 1, 2019. A c.3.82% increase from $66.47pb on March 29, 2019

Bonds

The FGN Bond market opened the month on a relatively flat note, with slight demand on the 2025s offset by sell pressures on other maturities. Average bond yields consequently remained unchanged at 14.35%.

The market has maintained a slightly bearish posture in recent sessions, with some players still looking to take profit at current levels. We expect this trend to persist in the near term.

Benchmark FGN Bonds
Description	Bid (%)	Offer (%)	Day Change (%)
14.50 15-Jul-21	14.49	13.97	(0.03)
16.39 27-Jan-22	14.32	14.02	0.04
12.75 27-Apr-23	14.19	13.81	0.02
14.20 14-Mar-24	14.35	13.91	0.01
13.53 23-Mar-25	14.20	14.08	(0.21)
12.50 22-Jan-26	14.46	14.26	(0.01)
16.29 17-Mar-27	14.42	14.24	0.01
13.98 23-Feb-28	14.42	14.23	0.09
12.15 18-Jul-34	14.36	14.29	0.02
12.40 18-Mar-36	14.30	14.20	0.01
16.2499 18-Apr-37	14.30	14.11	0.02

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market traded on a slightly bullish note, with yields compressing marginally by c.5bps due to the continued absence of an OMO auction by the CBN and the improved system liquidity levels from FAAC inflows in the previous session.

We expect the slight moderation in yields to persist as market players look ahead to the NTB auction scheduled to hold on Wednesday.

Benchmark Treasury Bills
Description	Bid (%)	Offer (%)	Day Change (%)
4-Apr-19	11.25	9.00	0.25
2-May-19	12.25	11.70	0.00
13-Jun-19	12.00	11.15	(0.20)
18-Jul-19	12.20	12.00	0.10
1-Aug-19	13.25	13.00	0.00
12-Sep-19	12.95	12.90	(0.05)
3-Oct-19	13.10	12.85	(0.20)
14-Nov-19	12.95	12.80	(0.20)
5-Dec-19	12.80	12.75	(0.15)
2-Jan-20	12.95	12.75	(0.10)
6-Feb-20	11.25	9.00	0.25

Source: Zedcrest Dealing Desk

Money Market

Rates in the money market fell by c.5pct down to single digit levels as system liquidity was bolstered significantly to c.N325bn positive following the inflows from FAAC payments in the previous session, even as the CBN continued to hold off on an OMO auction.

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

Money Market Rates
	Current (%)	Previous (%)
Open Buy Back (OBB)	9.86	10.07
Overnight (O/N)	10.67	10.71

Source: FMDQ, Zedcrest Research

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (spot) and N355.78/$ (SMIS). The NAFEX closing rate in the I&E window appreciated by 0.02% to N360.60/$, whilst market turnover dipped by 57% to $156m. At the parallel market, the cash rate fell back to N358.30/$ whilst the transfer rate remained unchanged at N364.00/$.

FX Market
	Current (N/$)	Previous ( N/$)
CBN Spot	306.95	306.95
CBN SMIS	355.78	355.78
I&E FX Window	360.60	360.68
Cash Market	358.30	357.50
Transfer Market	364.00	364.00

Source: CBN, FMDQ, REXEL BDC

Eurobonds

Investors remained slightly bullish on the NGERIA Sovereigns, with yields declining further by c.6bps on the day. This is coming as growth fears in developed markets subside and investors renew risk on bets in choice EM assets.

In the NGERIA Corps, we witnessed renewed interests on the UBANL 22s.

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