Bond Bulls Cherry-Pick on Higher Yielding Maturities as Market Maintains Balance

Proshare

Tuesday, August 28, 2018 /07:50PM / Zedcrest Capital

***NLC optimistic Nigerian workers will get new minimum wage this year***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.14%

As at August15, 2018,9bps down from 11.23% recorded in June 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$46.09bn

As atAugust 24, 2018. A c.0.09% decrease from 46.13% on August 23 2018

Brent Crude

$76.19pb

As at August 28, 2018. A c.0.08% decrease, from$76.25pb on August 27, 2018

 

 

Bonds

Activities in the Bond market picked up slightly in today’s session, with renewed demand from clients witnessed on the mid to long end of the curve. In line with our expectations for the week, we witnessed some client demand come in to take advantage of the relatively higher yields in the market, most notably on the 2026s and 2036s, which were hitherto the highest yielding maturities.

 

We however note that the market sentiment still remains slightly bearish, and we consequently expect yields to remain relatively stable at these levels, with occasional demand from clients expected to keep yields in check in the near term.

 

 

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.73

13.30

(0.23)

14.50 15-Jul-21

14.26

13.96

(0.24)

16.39 27-Jan-22

14.28

14.01

0.00

14.20 14-Mar-24

14.63

14.38

0.07

12.50 22-Jan-26

14.88

14.77

(0.09)

16.29 17-Mar-27

14.90

14.89

(0.04)

13.98 23-Feb-28

14.91

14.84

(0.02)

12.15 18-Jul-34

14.91

14.84

(0.04)

12.40 18-Mar-36

14.92

14.89

(0.08)

16.2499 18-Apr-37

14.88

14.81

(0.02)

Source: Zedcrest Dealing Desk


Treasury Bills

The T-bills marketremained relatively quiet in today’s session, with market players still favoring the shorter tenured maturities, while yields on the mid tenors remained slightly pressured, ticking higher by c.5bps.

There will be an NTB Auction tomorrow, with the CBN expected to rollover a total of c.N207bn worth of maturing NTBs. We do not anticipate any significant changes in rates from their previous auction levels, with just a slight uptick expected on the 364-day, as we have witnessed the DMO consistently manage rates in previous auctions via demand from non-competitive client bids. Please see our auction expectations below:

NTB Auction Expectation

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

24.96

10.00 - 10.20

10.00

182 days

44.99

10.30 - 10.50

10.40

364 days

137.00

11.30 - 11.50

11.22




Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

13-Sep-18

11.05

10.15

0.05

4-Oct-18

11.05

10.45

0.05

1-Nov-18

11.65

11.35

(0.15)

6-Dec-18

12.10

11.80

0.00

3-Jan-19

12.35

12.05

0.05

14-Feb-19

12.35

12.15

0.05

14-Mar-19

12.20

12.10

0.00

4-Apr-19

12.20

11.85

0.00

18-Jul-19

12.05

11.70

(0.20)

Source: Zedcrest Dealing Desk

 

 

Money Market

The OBB and OVN ratesmoderated to 9.92% and 10.83% respectively, as there were no significant funding pressures in the system today. System liquidity is consequently estimated to be relatively unchanged from its opening levels of c.N227bn.

 

Rates are still expected to trend lower, with system liquidity expected to remain relatively buoyant towards weekend.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

9.92

12.83

Overnight (O/N)

10.83

13.92

Source: FMDQ, Zedcrest Research

FX Market

The Naira/USD rate depreciated at the interbank,closing at N306.15/$ from N306.10/$ previously. At the I&E FX window, a total of $170.37mn was traded in 328 deals, with rates ranging between N350.00/$ - N364.00/$. The NAFEX reference rateappreciated by 0.18% to N362.38/$ from N363.00/$ previously.

At the parallel market, the cash rates appreciated by 10k to N359.20/$, while transfer rates depreciated by 50k to N362.00/$.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.15

306.10

CBN SMIS

352.00

352.00

I&E FX Window

362.38

363.00

Cash Market

359.20

359.30

Transfer Market

362.00

361.50

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns remained relatively calm, with slight interests witnessed mostly on the 2030s and 2047s. Investors were however slightly bearish on the 2022s, with yields compressing marginally by 1bp on average.

 

The NGERIA Corps were relatively more active, with demand witnessed mostly on the DIAMBK 19s and FIDBAN 22s. We however witnessed slight selloff on the ZENITH 19s and FBNNL 21s.

 

 

 Proshare Nigeria Pvt. Ltd.


 Proshare Nigeria Pvt. Ltd.



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