Bond Auction Rates Clear Lower With Increased Demand on the 10-yr

Proshare

Thursday, January 31, 2019   08:00 AM / Zedcrest Capital


***FG targets $2bn from oil, gas lease licence renewal***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.44%

As at January 16, 2019. A c.16bps increase from 11.28% recorded in November 2018

MPR

14.00%

Left Unchanged for the 13th Consecutive Time at the Jan. 22, 2019 MPC Meeting

External Reserves

$43.17bn

As at January 28, 2019. A c.0.01% decrease from $43.13bn on January 25, 2019

Brent Crude

$61.69pb

As at January 30, 2019. A c.0.12% increase from $60.36pb on January 29, 2018

 

Bonds

The Bond market traded on a relatively flat note, with yields compressing marginally by c.1bp on the back of slight demand on the 22s and 36s.

 

In line with our expectations, the Bond auction by the DMO witnessed a moderate level of subscription, with demand skewed towards the 2028 bond and average bid-to-cover at 1.68X. The DMO consequently sold a total of c.N117bn of the N150bn offered, with stop rates clearing at c.15bps below their previous levels.

 

Given the robust demand at the auction today, we expect slight demand interests to persist in the near term. Our longer term outlook however remains slightly bearish as market players are expected to become slightly risk off bonds in view of the forthcoming elections.

 

FGN Bond Auction Result

Maturity

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

APR 2023

15.20

50.00

16.57

5.85

MAR 2025

15.25

50.00

31.25

20.10

FEB 2028

15.35

50.00

149.27

91.04

Source: Zedcrest Research

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.20

14.46

0.01

14.50 15-Jul-21

15.37

15.17

(0.02)

16.39 27-Jan-22

14.91

14.52

(0.15)

14.20 14-Mar-24

15.01

14.61

0.05

12.50 22-Jan-26

15.31

14.95

0.05

16.29 17-Mar-27

15.18

15.01

0.02

13.98 23-Feb-28

15.40

15.29

0.04

12.15 18-Jul-34

15.31

15.05

0.01

12.40 18-Mar-36

15.13

15.08

(0.09)

16.2499 18-Apr-37

15.13

14.99

(0.03)

Source: Zedcrest Dealing Desk



Treasury Bills

The T-bills market was scantily traded as demand interests were focused at the NTB auction by the CBN. Yields however compressed further by c.10bps on the back of improved system liquidity levels which fostered some buying interests on the short-end of the curve.

The NTB auction was moderately subscribed with average bid-to-cover of 1.28x. The CBN was consequently able to raise the total amount of c.N255bn T-bills offered, with rates clearing at their previous levels of 11.00%, 13.50% and 15.00% on the 91-, 128- and 364-day bills respectively.

We expect the market to trade on a relatively flat note tomorrow, as the CBN is expected to float a sizeable auction on the back of the robust system liquidity levels (c.N300bn) and expected inflows from OMO maturities (c.N191bn).

NTB Auction Results

Tenor

Rate (%)

Offer (₦’bn)

Sub (₦'bn)

Sale (₦'bn)

91-days

11.00 

7.85

41.05

28.02

182-days

13.10

69.57

68.42

58.68

364-days

15.00

177.22

214.38

167.93

Source: Zedcrest Research

 

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Feb-19

13.00

12.00

(0.45)

14-Mar-19

12.80

12.25

(0.70)

4-Apr-19

12.75

12.00

(0.75)

2-May-19

11.75

11.65

(0.15)

13-Jun-19

12.80

12.25

(0.20)

18-Jul-19

13.50

12.50

0.00

1-Aug-19

13.50

13.35

(0.20)

12-Sep-19

14.55

14.20

0.05

3-Oct-19

14.85

14.60

0.00

14-Nov-19

14.95

14.80

(0.05)

5-Dec-19

14.95

14.85

(0.05)

Source: Zedcrest Dealing Desk 


 

Money Market

Rates in the money market declined further by c.7pct as system liquidity was significantly bolstered by inflows from FAAC payments in the previous session. The OBB and OVN rates consequently ended the session at 3.83% and 4.50% respectively.

We expect funding rates to inch higher tomorrow, as the CBN is expected to conduct a sizeable OMO auction to mop up the excess system liquidity and expected OMO inflows.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

3.83

10.17

Overnight (O/N)

4.50

10.83

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.75/$ (spot) and N357.97/$ (SMIS). The NAFEX rate in the I&E window appreciated marginally by c.0.01% to N363.32/$. At the parallel market, cash rates appreciated by 0.42% to N358.70/$, whereas transfer rates depreciated by c.0.14% to N366.00/$.


FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.75

306.75

CBN SMIS

357.97

357.97

I&E FX Window

363.32

363.34

Cash Market

358.70

360.20

Transfer Market

366.00

365.50

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns remained relatively weak, with yields ticking higher by c.3bps on the day.

 

In the NGERIA Corps, market players were relatively quiet except for some slight sell-off witnessed on the Access 21s Snr.



Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.


 

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