Bonds & Fixed Income | |
Bonds & Fixed Income | |
5018 VIEWS | |
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Friday, December 07, 2018/ 07:44AM / Zedcrest Capital
*** Oil
Prices Crash As OPEC+ Scrambles At 11th Hour, no deal announced at the end of
today’s meeting ***
KEY
INDICATORS
Indicator |
Value |
Commentary |
Inflation |
11.26% |
As at November 21, 2018. A c.2bps down from 11.28% recorded in
September 2018 |
MPR |
14.00% |
Left Unchanged for the 12th Consecutive Time at the
Nov. 22, 2018 MPC Meeting |
External Reserves |
$42.49bn |
As at December 5, 2018. A c.0.19% increase from $42.41bn on December
4, 2018 |
Brent Crude |
$59.85pb |
As at December 6, 2018. A c.4.86% decrease from $62.91pb on December 5, 2018 |
Bonds
The FGN bond market traded on a
quiet note with very little volume passing through on the day. Yields however
compressed by c.3bps on the average across the curve, largely driven by a 10bps
drop in yields on the FGN 2037s maturity.
The DMO today issued an offer
circular for the N100bn 7-year Sukuk issue priced at 15.743%. With the offer
open for the next two weeks, we expect the monthly FGN auction initially
scheduled for next week (December 12, 2019) to be pushed further down in the
month.
We maintain a bearish outlook on
Bonds as investors’ price in the increased supply of Bonds coming from Sukuk
issuance.
Benchmark
FGN Bonds |
|||
Description |
Bid (%) |
Offer (%) |
Day Change
(%) |
15.54 13-Feb-20 |
15.24 |
14.90 |
(0.05) |
14.50 15-Jul-21 |
15.69 |
15.32 |
(0.07) |
16.39 27-Jan-22 |
14.99 |
14.79 |
(0.04) |
14.20 14-Mar-24 |
15.29 |
15.07 |
(0.03) |
12.50 22-Jan-26 |
15.84 |
15.72 |
0.00 |
16.29 17-Mar-27 |
15.80 |
15.71 |
0.00 |
13.98 23-Feb-28 |
16.03 |
15.89 |
0.00 |
12.15 18-Jul-34 |
15.80 |
15.59 |
0.00 |
12.40 18-Mar-36 |
15.80 |
15.69 |
(0.01) |
16.2499 18-Apr-37 |
15.66 |
15.57 |
(0.10) |
Source: Zedcrest Dealing Desk
Treasury Bills
The
T-bills market continued on a bearish run today, as the CBN continued with its
liquidity tightening strategy via the issuance of OMO T-bills. We saw spreads
widened across the curve as sell off intensified especially on the short end of
the curve. However, we saw some yield hunting by some local investors at the long-end
but this was not enough to reverse the general weak market sentiment.
Consequently, Yields remained flat on the average across quoted benchmark
T-bills securities.
The CBN
consequently rolled over the total amount of maturing OMO bills at today’s OMO
auction, largely maintaining rates. The stop rates on the mid- (183-days) and
long-end (351-days) maturities were maintained at 13.50% and 15.00%
respectively, while the short-end (92-days) increased by 25bps to close at
11.90%. The CBN sold a total of c.N691.51 across the three maturities on offer,
including special OMO sales of N287.73bn.
The CBN is
expected to continue the issuance of OMO T-bills, however at a slow pace as
market liquidity shrinks. We expect the market to close the week on a bearish
note.
|
||||
Tenor |
Rate (%) |
Offer (₦’bn) |
Sub (₦'bn) |
Sale (₦'bn) |
92-days |
11.90 |
100.00 |
0.16 |
0.16 |
183-days |
13.50 |
250.00 |
58.74 |
58.74 |
364-days |
15.00 |
350.00 |
344.88 |
344.88 |
364-days (Special) |
15.00 |
Nil |
Nil |
287.73 |
|
|||
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
3-Jan-19 |
14.50 |
13.60 |
0.00 |
14-Feb-19 |
15.00 |
14.40 |
0.50 |
14-Mar-19 |
14.25 |
13.55 |
0.00 |
4-Apr-19 |
14.00 |
12.85 |
0.00 |
2-May-19 |
13.20 |
12.95 |
0.00 |
18-Jul-19 |
13.75 |
12.75 |
(0.05) |
1-Aug-19 |
14.55 |
14.30 |
(0.05) |
12-Sep-19 |
15.00 |
14.45 |
0.00 |
3-Oct-19 |
15.10 |
14.75 |
0.00 |
14-Nov-19 |
15.00 |
14.75 |
(0.10) |
Source: Zedcrest Dealing Desk
Money
Market
Money Market
rates closed lower on the day, despite liquidity mop up by the CBN via the sale
of OMO securities (c.N691.51bn). Open Buy-Back (OBB) and overnight (O/N)
dropped to 7.79% (from 12.00%) and 8.71% (from 13.08%) respectively due to OMO
maturities of c.N684.84bn. Consequently, System Liquidity is estimated to close
in a positive territory of c.N208bn.
We expect rates
to close the week higher as market participants provide funding for FX Retail
interventions by the CBN.
Money Market Rates |
||
|
Current (%) |
Previous (%) |
Open Buy Back (OBB) |
7.79 |
12.00 |
Overnight (O/N) |
8.71 |
13.08 |
Source: FMDQ, Zedcrest
Research
FX Market
At the Interbank market, the
Naira/USD rate remained unchanged to close at N306.85/$ (spot) and N359.81/$
(SMIS). Value traded at the I&E FX window dipped up today with a total
trade turnover of $223.63 traded in 338 deals, with rates ranging between N351.00/$
- N366.00/$. The NAFEX closing rate depreciated by c.0.14% to close at
N365.19/$ from N364.65/$ previously.
The naira pared some gains from
the previous session at the parallel markets, as the cash rate depreciated by
c. 0.82% to close at N368.00/$ (from N365.00/$ previously. The transfer rate
remained stable at N370.00/$.
FX Market |
||
|
Current (N/$) |
Previous ( N/$) |
CBN Spot |
306.85 |
306.85 |
CBN SMIS |
359.16 |
359.16 |
I&E FX Window |
365.16 |
364.65 |
Cash Market |
368.00 |
365.00 |
Transfer Market |
370.00 |
370.00 |
Source: CBN, FMDQ, REXEL
BDC
Eurobonds
Sub-Saharan
sovereign Eurobonds weakened amidst crashes in global oil prices from failure
of OPEC+ to agree a supply cut deal as well as a slump in U.S. stock prices
from increased trade tensions with China. The NGERIA Sovereign Eurobonds also witnessed negative sentiments
across the curve, as yields ticked higher by c.13bps on the average across the
curve, for a third consecutive trading session.
The NGERIA Corps also weakened,
underperforming their sovereign counterparts. We saw sell interests on the
FIDBAN 22s, UBANL 22s and Zenith 22s which saw their yields rise by c.29bps,
c.35bps and 25bps respectively. DAIMBK 19s continue to push through the
negativity, as investor demand pushed yields lower by c.105bps on the paper.
Related News
1. Fixed Income
Market Maintains Bearish Posture As The CBN Carries On With OMO Auctions
2. The CBN Accelerates Its Liquidity Mop Up Exercise With A
Fourth Consecutive OMO Auction
3. Yields Continue to Rise as CBN Maintains Rates at 3rd
Consecutive OMO Auction
4. Bullish Run Reversed as Yield on Long Dated Bills Hit
17.0%
5. Money Market
Rate Increased Significantly Last Week As The Overnight Rate Rose To 17.36%
6. Access Bank Plc Series XX N30billion Commercial Paper
Closes Tomorrow
7. December 2018 FGN Savings Bond Offer for Subscription
8. CBN Sends Hawkish Signals to The Market, Hikes OMO Rate to
YTD Highs
9. Fixed Income Markets Trend Bearish as CBN Hikes OMO Rate