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Bond Auction Clears 20bps Lower as CBN Cuts OMO Rate

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Thursday, November 23, 2017 8:38AM/ Zedcrest Capital 

Table 1: Key Indicators
 

***FG revises 2018 -2020 MTEF GDP growth rate downward to 3.5%***

Inflation

15.91%

Declined by 0.07% in October from 15.98% in September 2017

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting of November 2017

External Reserves

$34.41billion

Accreted by 2.04% as at 22nd November from $34.37bn on 17th November 2017

Brent Crude

$62.69pb

Rose by 0.80% from $62.19pb on 21st November 2017


Bonds

The bond market traded with mixed sentiments today, as market players cautiously traded their auction expectations. We however witnessed slight sell towards market close, as some market players reacted to the extension of the bond auction cut-off. Average bond yields consequently rose marginally by 1bp to 14.61%. We expect the market to be client driven tomorrow, with slight demand expected at these levels.

Table 2:Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

14.55

14.48

(0.04)

15.54 13-Feb-20

14.42

14.35

(0.16)

14.50 15-Jul-21

14.77

14.70

0.05

16.39 27-Jan-22

14.50

14.43

0.03

14.20 14-Mar-24

14.73

14.66

0.06

12.50 22-Jan-26

14.73

14.66

0.03

16.29 17-Mar-27

14.78

14.71

0.00

12.15 18-Jul-34

14.61

14.54

0.00

12.40 18-Mar-36

14.55

14.48

0.05

16.25 18-Apr-37

14.45

14.38

0.09

 






























 Source: Zedcrest Dealing Desk

The DMO sold a total of N87.77billion of the 2021 and 2027 bonds, out of a total subscription of N105.39billion. Rates cleared at 14.80% and 14.79%, c.20bps lower than the previous stop rate of 15%. 

Table 3: Bond Auction Result

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N’bn)

Jun-21

14.79

50.00

23.00

14.60

Mar-27

14.80

50.00

82.39

73.17


Treasury Bills
The T-bills market was scantily traded today, with a slight decline of 12bps in average yields to 17.72%, as market players poured their demand into the OMO auction by the CBN. The CBN sold a total of N44.43billion of the 197-day bill, out of a total subscription of N66.52billion, as it cut its sale rate by 5bps to 17.75%. We expect the market to be slightly bullish tomorrow as market players react to OMO inflows of c.N200bn and the slight decline in the auction rate.
 

Table 4: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

7-Dec-17

16.00

15.75

0.00

4-Jan-18

16.20

15.95

(0.70)

1-Feb-18

17.00

16.75

0.00

1-Mar-18

16.35

16.10

0.00

5-Apr-18

16.95

16.70

(0.20)

3-May-18

17.60

17.35

0.20

14-Jun-18

17.60

17.35

0.00

5-Jul-18

17.50

17.25

0.00

2-Aug-18

16.75

16.50

0.00

13-Sep-18

15.00

14.75

0.00

4-Oct-18

15.25

15.00

0.00

Source: Zedcrest Dealing Desk  

Table 5: OMO  - 22 November 2017

Tenor

Rate (%)

Offer (NBn)

Sub (N'bn)

Sale (N'bn)

 92 day

nil

10.00

0.008

nil

197 day

17.75

40.00

66.52

44.43

Source: CBN 


Money Market
The OBB and OVN rates remained slightly unchanged from the previous day’s levels to close at 27.17% and 29.17%. System liquidity is however estimated to decline to N160billion negative due to debits for today’s OMO. We expect rates to trend southwards tomorrow, due to inflows from the maturing OMO T-bills. This is however barring a significant OMO T-bill sale by the CBN tomorrow.

 

Table 6: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

27.17

29.17

Overnight (O/N)

29.17

31.83

Source: FMDQ, Zedcrest Research 

FX Market
The CBN Official spot rate remained stable at its previous day rate of N305.90/$. Its external reserves is however recorded to have improved by 2.04% to $34.41billion as at 22nd of November 2017. Rates at the Investors and exporters FX window depreciated to N360.65/$ from N359.87/$ in the previous session. The parallel market however stayed flat at its previous day rate of N362.10/$.

 

Table 7: FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.90

305.90

CBN SMIS

330.00

330.00

I&E FX Window

360.65

359.87

Parallel Market

362.10

362.10

Source: CBN, FMDQ, REXEL BDC 

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

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