Bond Yields Compress on Renewed Local Client Demand

Proshare

Tuesday, July 03, 2018 / 7:40 PM / Zedcrest Capital

***CBN boosts wholesale forex market with $210m***

KEY INDICATORS

Inflation

11.61%

Declined by 0.87% in May from 12.48% in April 2018

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting 0n 4 April 2018

External Reserves

$47.63billion

Rose by 0.42% as at 13 June from $47.43bn as at 7 June 2018

Brent Crude

$77.01pb

Fell by 0.99% from $77.78pb on 2 July 2018

 

 

Bonds

The bond market traded on a slightly bullish note with yields compressing by c.21bps on average. This came as market players improved their bids across the curve following renewed demand from local clients mostly on the 2027s, 2036s and 2037 bonds.  We expect the market to be largely client driven in the near term, even as we have witnessed a slowdown in offshore selling interests in recent sessions.

 

FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.37

12.92

(0.57)

14.50 15-Jul-21

14.04

13.50

(0.02)

16.39 27-Jan-22

14.21

13.36

(0.14)

14.20 14-Mar-24

13.79

13.42

(0.14)

12.50 22-Jan-26

14.26

13.96

(0.24)

16.29 17-Mar-27

14.05

13.88

(0.28)

13.98 23-Feb-28

14.27

14.00

(0.09)

12.15 18-Jul-34

14.23

14.14

(0.32)

12.40 18-Mar-36

14.30

14.14

(0.24)

16.2499 18-Apr-37

14.24

14.07

(0.10)

Source: Zedcrest Dealing Desk

 

Treasury Bills

The T-bills market traded on a slightly bullish note, with yields compressing by c.10bps, following some demand mostly on the 4-Oct-18, 3-Jan-19 and 14-Feb-19 benchmark T-bill maturities in anticipation of OMO and PMA maturities on Thursday.  The CBN will conduct a PMA auction tomorrow with a total of c.N171bn on offer. We expect rates to clear slightly higher (c.10bps) than previous levels due to the increased volumes on offer. 


Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

2-Aug-18

12.25

11.85

(0.25)

13-Sep-18

12.35

12.00

(0.65)

4-Oct-18

11.75

11.55

(0.50)

1-Nov-18

12.30

12.10

(0.20)

6-Dec-18

12.35

12.10

(0.15)

3-Jan-19

12.20

11.95

(0.05)

14-Feb-19

12.05

11.75

(0.40)

14-Mar-19

12.40

11.80

(0.05)

4-Apr-19

12.45

11.00

0.00

Source: Zedcrest Dealing Desk

 

 

NTB PMA Expectations

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

9.52

10.00 - 10.30

10.00

182 days

33.93

10.30 - 10.50

10.30

364 days

127.06

11.45 - 11.65

11.50

Source: Zedcrest Research


Money Market

The OBB and OVN rates fell by c.10bps to 19.33% and 20.08% respectively, as there were no significant funding pressures in the system. System liquidity is consequently estimated at c.N80bn positive, following estimated deductions (c.N70bn) for wholesale FX sales funded in the previous session. We expect rates to maintain a slightly downward trend, as market players anticipate inflows from FAAC and OMO maturities to further ease funding pressures in the system.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

19.33

30.00

Overnight (O/N)

20.08

32.50

Source: FMDQ, Zedcrest Research

 

FX Market

The Interbank rate remained stable at its previous rate of N305.75/$. The I&E FX rate appreciated slightly by 0.03% to N361.28/$. In the parallel market, cash rates appreciated by N1.00 to N359.00/$, while the transfer market rate remained stable at N364.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.70

305.75

CBN SMIS

330.00

330.00

I&E FX Window

361.28

361.40

Cash Market

359.00

360.00

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC

  

Eurobonds:

We witnessed renewed demand in the NGERIA Sovereigns, with yields compressing by c.6bps on average. The most demand were on the 2030s and 2047s which gained +0.75pt and +0.60pt, consequently recovering from their previous day downturn.

 

The NGERIA Corps posted slight gains on most of the trade tickers, with the most gains seen on the DIAMBK 19s, FBNNL 21s and UBANL 22s. We however witnessed slight sell on the FIDBAN 22s which is now down by –0.50pt to 97.50 (11.24%).


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

 

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3.       Fixed Income Market Monitor – Average Money Market Rate Increased by 10.42%

4.       Offshore Selloff, Weak Local Demand Drive Bond Yields Higher

5.       CBN Holds Off on OMO as Interbank SLF hits 5-Week High

6.       Summary of June 2018 FGN Bond Auction

7.       DMO Raises only Half of Total Bonds Offered in yet another Weak Auction

8.       Bond Yields Tick Higher Ahead of Auction Tomorrow

9.       Funding Rates rise above 10pct as CBN Resumes OMO Auction

10.   Borrowing Cost on External Debt to Increase

11.   Lotus Halal Fixed Income Fund Listed On NSE

12.   T-bills Remain Bearish Despite Robust System Liquidity

13.   T-bill Yields Tick Higher Despite Huge OMO Inflows

14.   Offshore Selloff Drives FGN Bond Yields Closer to 14%

 

 

 

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