Sustained decline in Fixed Income yields as Market Players stay bullish

Thursday, November 07, 2017/7.30PM/Zedcrest Capital 

KEY INDICATORS

Bonds
The Bond market maintained its bullish run in today’s session with sustained demand witnessed especially on the 5-, 10- and 20-yr bonds. This was as market players continued to speculate a further decline in the sovereign yield curve, owing to the discontinuance of OMO T-bill issuance by the CBN. Average bond yields consequently declined by a further 6bps to close today at 14.45%. We expect this trend to persist, but at a slower pace, as market players are expected to trade cautiously in anticipation of the bond auction next week. 

 

Source: Zedcrest Dealing Desk 

Treasury Bills
The T-bills market remained aggressively bullish in today’s session, with rates on most of the medium and long tenured maturities trading below 16% and 15% respectively. Market volumes were however lower than in the previous session as most market players preferred to hold on to their long positions due to the significant decline in supply of T-bills to the market. Average T-bill yields consequently declined by 25bps to close today at 16.56%. We expect the market to be scantily traded tomorrow, but with a sustained decline in yields as market players continue to trade on the “NO OMO” trend. 

Source: Zedcrest Dealing Desk 

Money Market
The OBB and OVN rates crashed by 750bps to 6.33% and 7.33% due to c.N110bn OMO maturity inflows which improved system liquidity to c.N100bn long, from a negative opening figure of c.N10bn. We expect rates to remain stable at single digit levels tomorrow, barring any significant OMO T-bill or FX intervention by the CBN. 

Source: FMDQ, Zedcrest Research

FX Market
The CBN Official spot rate appreciated marginally by 0.02% to N306.45/$ from N306.50/$ recorded in the previous session. Rates at the Investors and exporters FX window closed at N360.31/$ from N360.93/$ in the previous session. Rates at the parallel market also appreciated slightly to close at N361.40/$. 

Source: CBN, FMDQ, REXEL BDC 

For more details email research@zedcrestcapital.com or call the dealing desk via 01-6311667   

Related News
1. Renewed demand witnessed on T-bills as CBN Suspends OMO sales
2. Invest in FGN Monthly Bond Auction – December 2017
3. FG Savings Bond Offer for December 2017 Opens
4. Bond Market closes Bearish as CBN Signals Market with a “No sale” OMO Result
5. Bond market turns bearish as CBN Sells N117bn T-bills
6. Funding Rates crash as CBN Refunds banks for lost FX bids
7. Fitch Rates Nigeria's USD Notes 'B '