Bond Bears Take the Day, with Rout on the Mid Tenors

Proshare

Monday, September 29, 2018/ 06.48PM / Zedcrest Capital


***Nigerian governors to take position on minimum wage Tuesday ***– Yari

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at October16, 2018,5bps up from 11.23% recorded in August 2018.

MPR

14.00%

Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting

External Reserves

$42.28bn

As atOctober26, 2018. A c.0.14% decrease from $42.34bnon October25, 2018

Brent Crude

$77.62pb

As at October 29, 2018. A c.0.44% increasefrom$77.28pbon October 26, 2018

 

 

Bonds

Yields in the bond market spiked by c.17bps in today’s session, marking its worse d/d loss in what has been a relatively quiet month for bonds. The spike in yields came on the back of some offshore sell off on the 2027s (15.45% high) and consequent spill over to the 2028s which breached the 15.50% mark, trading as high as 15.53%.

 

Barring continued offshore selloff, we expect yields to moderate slightly tomorrow, with local clients expected to be attracted to current yield levels, which are currently at their month to date highs. Our expectations however remain for a continued uptrend in yields, due to expectations for further OMO rate hikes by the CBN, as it looks to stem the rate of FPI outflows from OMO maturities.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.64

14.17

0.21

14.50 15-Jul-21

15.40

15.07

0.23

16.39 27-Jan-22

14.86

14.47

0.10

14.20 14-Mar-24

15.31

15.02

0.12

12.50 22-Jan-26

15.44

15.04

0.28

16.29 17-Mar-27

15.50

15.41

0.20

13.98 23-Feb-28

15.55

15.43

0.12

12.15 18-Jul-34

15.58

15.24

0.27

12.40 18-Mar-36

15.35

15.15

0.06

16.2499 18-Apr-37

15.27

15.20

0.08

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

Yields in the T-bills market compressed slightly by c.7bps due to slight buying interests witnessed mostly on the shorter end of the curve (Nov Maturities). Market players were also attracted to the relatively more attractive yield on the 24-Oct maturity issued by the CBN at its last OMO auction. This consequently resulted in slight ease in pressures on the longer tenured maturities.

 

In tomorrow’s session, we expect the market to maintain a slightly bullish posture, as market players anticpate inflows from FAAC payments to further bolster system liquidity levels. Trading activities are however expected to remain cautious in view of the forthcoming PMA and expected OMO auction.

 

Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

6-Dec-18

13.00

12.35

0.00

3-Jan-19

13.25

12.75

0.25

14-Feb-19

13.05

12.85

(0.15)

14-Mar-19

13.00

12.80

(0.20)

4-Apr-19

12.75

12.50

0.00

18-Jul-19

13.10

12.60

(0.40)

1-Aug-19

13.70

13.50

(0.25)

12-Sep-19

14.35

14.10

0.05

3-Oct-19

14.50

14.00

0.20

Source: Zedcrest Dealing Desk

 

 

Money Market

The OBB and OVN rates rose higher by c.4pct to 14.83% and 15.50%, as funding for a wholesale SMIS (c.N75bn est) by the CBN put further pressures on system liquidity which opened the session at c.N162bn.

 

Rates are expected to moderate in subsequent sessions due to inflows from FAAC payments (c.N382bn) expected before month end.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

14.83

10.33

Overnight (O/N)

15.50

11.42

Source: FMDQ, Zedcrest Research

 

 

 

FX Market

At the Interbank, the Naira/USD spot rate depreciated by 0.02%toN306.60/$, while the SMIS rate remained unchanged atN362.82/$.At the I&E FX window a total of $51.14mn was traded in 102 deals, with rates ranging between N361.00/$ - N364.50/$. The NAFEX closing rate appreciatedfurtherby c.0.07% toN363.58/$ from N363.84/$ previously.

                                                                     

At the parallel market, the cash and transfer ratesremained unchanged at N361.00/$ and N364.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.60

306.55

CBN SMIS

362.82

362.82

I&E FX Window

363.58

363.84

Cash Market

361.00

361.00

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereignsremained relatively flat on the day, except for slight selling interests seen on the shorter end of the curve (21s – 23s).

               

The NGERIA Corpsremained dominated by interests on the DIAMBK 19s and UBANL 22s, with better sellers still seen on both tickers.

 

 Proshare Nigeria Pvt. Ltd.

 

 

 Proshare Nigeria Pvt. Ltd.


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