Bond Yields Compress as N300bn Bond Maturity hits System


Wednesday, May 30, 2018 / 07:55 PM / Zedcrest Capital

***NAFEX Rate hits 9-Month high at N362.02/$***

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The Bond market traded on a bullish note, with yields trending lower by c.20bps d/d. This was driven by local client demand especially on the short and medium tenured buckets. We witnessed the most demand around the 7-year tenor (2024s/2025s) which compressed by c.25bps, down to c.13.20% in last trades. We expect a slight ease in the bullish sentiments as demand from today’s bond maturity inflows thin out.

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Treasury Bills

The T-bills Market traded on a slightly bullish note, with demand skewed to the shorter end of the curve, as system liquidity remained significantly buoyant following inflows from c.N300bn bond maturity. The CBN raised the total amount on offer (N49.60bn) at its PMA today which was moderately over-subscribed (N103.40bn), mostly from non-competitive bidders. We expect a slight uptick in yields tomorrow, as we expect the CBN to conduct another OMO auction due to c.N250bn inflows from Maturing OMO bills and Net PMA repayments.


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Money Market

The OBB and OVN rates crashed further to 1.75% and 2.50% respectively, as system liquidity is estimated to have increased significantly to c.N600bn positive, following inflows from today’s bond maturity. We expect rates to tick slightly higher tomorrow, as the CBN is expected to intervene in the market via an OMO auction sale.


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FX Market

The Interbank rate remained stable at its previous rate of N305.95/$, even as the CBN’s external reserves maintained a steady decretion, down to $47.65bn following continued intervention by the CBN in the various market segments. Closing Rates in the I&E FX Window as published by the FMDQ has depreciated to a 10-month high of N362.02/$, as the market has remained net short of dollars in the past two weeks. Rates in the Cash and Transfer Market has however appreciated further by N1.00 and N0.50 to N362.50/$ and N366.00/$ respectively. This is following increased interventions by the CBN in the retail segment of the market. 


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The NGERIA Sovereigns lost some ground gained in previous sessions, as investors sold off slightly especially on the longer end the curve. The heaviest loser was the 2047s which is down by c.1.30pt to 99.70 as at last trade.


The NGERIA Corps were also a touch lower, except for marginal gains recorded on the FBNNLs, ECOTRA 21s and UBANNL 22s.


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