Bond Market Opens Bearish as Weakness in Mid-Tenors Persist

Proshare

Monday, October 15, 2018 / 06:45PM / Zedcrest Capital


***Nigeria to Sell Ajaokuta, Others for 2018 Budget ***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at September14, 2018,9bps up from 11.14% recorded in July 2018.

MPR

14.00%

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

External Reserves

$43.26bn

As atOctober12, 2018. A c.0.21% decrease from $43.35bnon October11, 2018

Brent Crude

$80.51pb

As at October 15, 2018. A c.0.98% increasefrom$79.73pbon October 12, 2018

 

 

Bonds

The bond market opened the week on a slightly bearish note, following slight sell on the 28s (c.15.28%) and 34s (c.15.23%). Bids were also weaker on the shorter end of the curve (21s and 22s), prompting a c.7bps uptick in yields d/d.

 

Market players are expected to remain cautious, in wake of the expected uptick in inflation results to be published tomorrow.

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.08

13.41

0.08

14.50 15-Jul-21

14.86

14.47

0.27

16.39 27-Jan-22

14.54

14.02

0.22

14.20 14-Mar-24

15.02

14.82

0.00

12.50 22-Jan-26

14.94

14.88

(0.02)

16.29 17-Mar-27

15.16

15.09

0.01

13.98 23-Feb-28

15.28

15.24

0.01

12.15 18-Jul-34

15.25

15.18

0.02

12.40 18-Mar-36

15.28

15.10

0.01

16.2499 18-Apr-37

15.21

14.98

0.06

Source: Zedcrest Dealing Desk 

 

Treasury Bills

The T-bills market also traded on a slightly bearish note, with most activities concentrated on the shorter end of the curve (Oct – Feb), where yields inched slightly higher by c.10bps. Across the curve, yields however closed on a relatively flat note, as funding pressures from a wholesale SMIS auction by the CBN kept most market players on the sidelines.

 

In subsequent sessions, we expect yields to remain slightly elevated, as market players anticipate renewed supply of bills via the forthcoming PMA (Wednesday) and expected OMO auction (Thursday).

 


Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

1-Nov-18

13.50

12.85

0.30

6-Dec-18

12.90

12.75

(0.15)

3-Jan-19

12.50

12.30

(0.40)

14-Feb-19

12.85

12.60

(0.05)

14-Mar-19

12.85

12.35

0.00

4-Apr-19

12.50

12.25

0.10

18-Jul-19

13.00

12.50

0.00

1-Aug-19

13.25

12.75

(0.05)

12-Sep-19

13.25

12.80

(0.05)

Source: Zedcrest Dealing Desk

 

Money Market

In line with our expectations, the OBB and OVN rates spiked by c.20pct to 39.92% and 44.33%, due to funding for the wholesale FX auction by the CBN. System liquidity is consequently estimated to have compressed to c.N30bn from c.N105bn opening the day.

 

We expect rates to remain elevated, as there are no significant inflows expected until Thursday, where we have c.N347bn in OMO T-bill maturities, and c.N33bn in coupon payments on the April 2037 FGN Bond.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

39.92

19.17

Overnight (O/N)

44.33

19.75

Source: FMDQ, Zedcrest Research 

 

 

FX Market

At the Interbank, the NGN/USD Spot rate depreciated by 0.02% to N306.50/$ from N306.45/$ previously, while the SMIS rate remained stable at N362.52/$. At the I&E FX window a total of $61.25mn was traded in 211 deals, with rates ranging between N321.00/$ - N365.00/$. The NAFEX closing rate appreciated by c.0.05% toN363.92/$ from N364.12/$ previously.

 

At the parallel market, the cash and transfer rates remained unchanged at N360.00/$ and N363.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.45

306.45

CBN SMIS

362.52

361.34

I&E FX Window

364.12

364.02

Cash Market

360.00

360.00

Transfer Market

363.00

363.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA sovereigns continued their mild recovery in today’s session, with yields compressing further by c.6bps on average. The Feb 2038 recorded the highest gains of c.0.50pct on the day.

                                                                                            

The NGERIA Corpswere mostly quiet, except for mild interests seen on the GRTBNL 18s and DIAMBK 19s.

 

 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

 

Related News

1.       Money Market Rate Decreased Marginally as OVN and OBB Fell to 19.75% and 19.17% Respectively

2.      Bond Market Turns Bearish Following Selloff on Mid-Tenors

3.      FBN Nigeria Eurobond (USD) Fund Mitigating Minimum Entry Investment Required for Eurobonds

4.      T-bills Market Trades Flat, as CBN Mops up c.N249bn in OMO Sale

5.      Yields Compress Marginally, with Interests on the Short Tenors

6.      Eterna Plc Proposes Issuance of N10bn 270 Day Commercial Paper

7.      FGN Eurobond Yields Trend Higher as Presidency Seeks Approval for New Issue

8.     Flour Mills of Nigeria Plc Bond Issuance Closes Today

9.      C and I Leasing Lists N7bn Fixed Rate Bond on FMDQ Platform

 

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