Nigeria's Inflation Rises to 17.33%, Highest In 4 Years, Causing a Somber Trading Session

Proshare

Wednesday, March 17, 2021 / 8:17AM / By Zedcrest Capital / Header Image Credit: BMO Asset


Proshare Nigeria Pvt. Ltd.


FGN Bonds

The FGN bond market opened the session on a bearish note, as investors digested Inflation reports released for the month of February. With inflation Figures at 17.33%, it showed an 86bps increase from the preceding month (16.47% in Jan.), as the hike was due to the continued rise in food inflation. We observed sell-offs across most bond maturities, as the market reacted negatively to higher-than-expected inflation figures. This, consequently increased average yields by 6bps across the benchmark curve.

 

With uncertainty in the short-term rates (Treasury Bills primary market auction) and with Bond yields playing at these low levels, we expect investors to remain stony-faced at the underperformance of yields and pursue other alternative investment options in the interim.

 

 

Benchmark FGN Bonds

 

Description

Bid (%)

Offer (%)

Day Change (%)

12.75 27-Apr-23

7.00

6.42

0.00

14.20 14-Mar-24

8.15

6.50

0.00

13.53 23-Mar-25

8.30

6.65

0.00

12.50 22-Jan-26

10.00

9.50

0.15

16.29 17-Mar-27

10.15

9.80

0.05

13.98 23-Feb-28

10.20

9.85

0.05

14.55 26-Apr-29

10.25

9.95

0.05

12.15 18-Jul-34

11.25

11.00

0.10

12.50 27-Mar-35

11.25

11.05

0.05

12.40 18-Mar-36

11.26

11.10

0.04

16.2499 18-Apr-37

11.27

11.10

0.05

9.80 24-Jul-45

11.30

11.12

0.05

14.80 26-Apr-49

11.35

11.10

0.10

12.98 27-Mar-50

11.35

11.10

0.10

 

Treasury Bills

The grim outlook in the bonds market, trickled into the Treasury Bills market, with the inflation report released this morning being the principal reason. We observed slight sell-offs at the short-end of the OMO Bills curve, as Banks looked to offload holdings to help funding pressure, as rates in the interbank market remain at double-digit levels despite OMO maturities of c.N113Bn. We also saw offers on the NTB side of the curve, as local investors were reluctant to invest ahead of the primary auction scheduled for later this week.

 

With Interbank rates on a high, we expect a quiet session in the secondary market as the market focuses on the NTB primary auction with muted expectations for another hike in stop rates with the volumes on offer relatively smaller than previous auctions.

 

Primary Market Auction Expectation

NTB  - March 17, 2021

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

1.50

1.90 - 2.10

2.0000

182 days

8.38

3.40 - 3.60

3.5000

364 days

37.18

6.40 - 6.60

6.5000

 

Benchmark OMO Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NGOMOB 0 05/11/21

10.00

0.01

0.00

NGOMOB 0 06/08/21

10.00

0.01

0.00

NGOMOB 0 08/10/21

10.00

0.02

0.00

NGOMOB 0 09/07/21

10.00

0.02

0.00

NGOMOB 0 10/19/21

11.00

0.02

0.00

NGOMOB 0 11/02/21

11.00

0.03

0.00

NGOMOB 0 12/07/21

11.00

0.03

0.00

NGOMOB 0 01/11/22

11.00

0.03

0.00

NGOMOB 0 02/01/22

11.50

0.03

0.00

NGOMOB 0 03/01/22

12.00

0.03

0.00

 

Benchmark NT-Bills

Description

Bid (%)

Offer (%)

Day Change (%)

NIGTB 0 04/29/21

7.00

0.01

0.00

NIGTB 0 05/13/21

7.00

0.01

0.00

NIGTB 0 06/10/21

7.00

0.01

0.00

NIGTB 0 07/01/21

7.00

0.01

0.00

NIGTB 0 08/26/21

8.50

0.02

0.00

NIGTB 0 09/09/21

8.50

0.02

0.00

NIGTB 0 10/14/21

8.50

0.02

0.00

NIGTB 0 11/11/21

10.00

0.03

0.00

NIGTB 0 01/13/22

10.00

0.03

0.00

NIGTB 0 02/10/22

10.00

0.03

0.00

 

Money Markets

Liquidity in the interbank market opened at c.N78.92bn, with rates trending slightly downwards following inflows from OMO maturities of N113Bn. The ease in system liquidity allowed local banks to pay down funding from the CBN window, crashing borrowings by c.82.55% D/D at the window. The OVN and OBB rates dropped by c.225bps to close at 10.25% and 10.50% respectively.

 

We anticipate the market to continue trade at these levels, as no positive liquidity respite is expected to come in for the rest of the week.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

10.25

12.50

Overnight (O/N)

10.50

12.75

 


FX Market

The Naira depreciated by 85k at the I&E FX window, as the supply squeeze continued to affect the general flow of funds. Approximately $32.33m changed hands (36% lower D/D) as most banks remained bided between N394/$ and N413/$.

 

The spread between rates at the parallel market widened today, with the cash rate appreciating by N1.50k on one hand while the transfer rate depreciated by N1.00k to close at N494.00/$.


FX Market

Current (N/$)

Previous (N/$)

CBN Spot

379.00

379.00

CBN SMIS

380.69

380.69

I&E FX Window

409.75

408.90

Cash Market

481.00

482.50

Transfer Market

494.00

493.00

 


Eurobonds

In today's trading session, the NIGERIA Sovereign papers traded on bullish sentiments as rates across the sovereign yield curve compressed by c.6bps, as the market awaits the outcome of the US FED meeting today and tomorrow. Investors shrugged off higher local inflation, amidst stability of oil prices above the $65pbl level.

 

It was a quiet session for the NIGERIA Corps tickers, with most tracked papers unchanged from the previous day's levels. Yields on the FIDBAN 2022s expanded by 7bps while the UBANL 2022s closed lower by 4bps.

 

 Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.



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