Average T-bills Yield Rose Significantly by 208bps to Close the Week at 14.43%

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Monday, September 17, 2018 / 11:58 AM /Anchoria  AM Research 

Money Market 

The money market rate increased last week as the Overnight rate (OVN) and Open Buy Back (OBB) rose to 12.00% and 10.67% respectively. Consequently, the average money market rate increased by 8.21% to settle at 11.14% due to reduction in system liquidity to close at cN300bn as a result of outflow from Retail FX funding of cN320bn, OMO sales of cN103.70bn (N81.95bn on Tuesday, N21.75bn on Monday, CBN declared No sales result on Thursday) and Wholesale, Invisibles and SME FX auction of $210mn despite inflow from OMO maturity and Bond coupon payment during the week. 

We expect rates to inch up on Monday as banks are expected to fund for another round of FX sales in the Wholesale, Invisibles and SME Market. Barring significant inflow during the week, the rate is expected to close the week higher. 

Instrument

07/09/2018

14/09/2018

Change

OBB

2.83%

10.67%

+7.84%

OVN

3.42%

12.00%

+8.58%

Source: Anchoria AM Research, FMDQ OTC 

Forex: USD/NGN

The CBN Official rate and the rate in the Investors and Exporters’ FX Window rose by 0.02% and 0.11% to close at N306.25/$ and N363.18/$ respectively. Naira at the parallel market inched up by 0.14% to close at N360.50/$ (using the Everdon BDC Rate). 

We expect rates in the parallel market to remain constant as the apex bank continues to supply FX into the market coupled with its frequent Wholesale and Retail SMIS programme.

07/09/2018

14/09/2018

Change

CBN Official Rate

306.20

306.25

+0.02%

I&E FX Window

362.78

363.18

+0.11%

Everdon Rate

360.50

360.50

+0.00%

Source: Anchoria AM Research, FMDQ OTC 

Fixed Income

Bond

The Bond market traded on a bearish note last week with sell offs on most the tenors except for 2021 and 2028 bonds which witnessed increased buying interest from local participants, yield on 2028 bond fell by 16bps. The FEB 2028 and MAR 2036 bonds were the most traded bonds during the week with N45.72bn and N41.73bn value traded respectively. Average yield rose by 21bps to close the week at 15.27%. This can be attributed to the following a) expected increase in FGN borrowing; b) Anticipated Monetary of the CBN with a tightening stance ahead of MPC meeting between 24 and 25 September 2018; c) gradual weakening of the Country’s Currency; d) Increase in 364 days T-bills spot rate. 

Secondary Market

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 Source: Anchoria AM Research, FMDQ OTC 

Treasury Bills

Due to reduced system liquidity during the week, the treasury bills market traded on a bearish note following the hike in 364 days T-bills at the Primary market auction. Consequently, the average yield rose significantly by 208bps to close the week at 14.43%. Market activities was relatively quiet as value of transactions fell to N1.44trillion from N1.54trillion in the previous week. 

T-bill Auction result

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 Secondary Market

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Source: Anchoria AM Research, FMDQ OTC

 

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Related News

1.       Markets Take a Breather as CBN Pauses on OMO

2.      Market Players Selloff Bills above 14% as CBN extends OMO offer to the 1-year

3.      Yield Curve Nears Inversion as DMO Clears 1-Year Bill at 15.60% eff. Yield

4.      Market Players Risk off T-bills, as CBN Elongates OMO Tenor above the 300day Mark

5.      Ahead of Next T-bills Auction Scheduled for 12th Sept, 2018

6.      Market Players Demand Higher Rates for OMO, as PMA Approaches

7.      CBN Raises OMO Stop Rates, Succumbs to Investor Pressure PMA Holds this Wednesday

8.     Average T-Bills Yield Rose by 15bps to Close the Week at 12.36%

9.      Yields Trend Higher following Hike in CBN OMO Stop Rate

10.  Central Bank makes a U-turn, raises rate to 12.50% for the 182days OMO Bills

11.   System Liquidity support bullish interests in the Fixed Income Markets

12.  External Factors Propel Yields to New Frontiers

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