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Bond Market closes Bearish as CBN Signals Market with a “No sale” OMO Result

Proshare

Wednesday, November 29, 2017/7.00PM/Zedcrest Capital 

*** $5.5bn Loan was phased to optimize cost of borrowing***- Oniha

KEY INDICATORS

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

$34.53billion

Accreted 2.04% as at 24th November from $34.49bn on 23rd November 2017

Brent Crude

$63.17pb

Fell by 0.29% from $62.99pb on 29th November 2017


Bonds

The bond market traded on a relatively quiet note today, with some sell on the long end of the curve, as market players wound up their activities for the month. Average bond yields consequently rose by 7bps to 14.71% from 14.65% in the previous session. We expect renewed demand from market players opening next month, as we anticipate release of the Q1 2018 T-bills calendar.
 

Table 1: Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

14.87

14.80

0.22

15.54 13-Feb-20

14.76

14.69

0.08

14.50 15-Jul-21

14.91

14.84

0.06

16.39 27-Jan-22

14.46

14.39

0.00

14.20 14-Mar-24

14.82

14.75

0.06

12.50 22-Jan-26

14.83

14.76

0.15

16.29 17-Mar-27

14.88

14.81

0.06

12.15 18-Jul-34

14.54

14.47

0.02

12.40 18-Mar-36

14.50

14.43

0.00

16.25 18-Apr-37

14.56

14.49

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 Source: Zedcrest Dealing Desk

Treasury Bills
The T-bills market traded on relatively quiet note with slight sell witnessed on some short tenured maturities (Dec - Jan) and some buys on some medium tenured bills (May - June). Average T-bills yields consequently stayed flat at 17.78% as in the previous session. The CBN issued a NO sale result for the OMO auction of today, despite the significant subscription of c.N62bn for the 91-day and 189-day bills offered. We expect bullish sentiments to prevail in the market opening next month, as the CBN continues to signal its intention to lower rates in the market. 

Table 2: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

7-Dec-17

17.40

17.15

0.00

4-Jan-18

16.65

16.40

0.00

1-Feb-18

17.50

17.25

0.00

1-Mar-18

15.40

15.15

0.00

5-Apr-18

16.90

16.65

0.00

3-May-18

17.55

17.30

0.00

14-Jun-18

17.40

17.15

0.00

5-Jul-18

17.45

17.20

0.00

2-Aug-18

16.75

16.50

0.00

20-Sep-18

15.30

15.05

0.00

4-Oct-18

15.25

15.00

0.00

Source: Zedcrest Dealing Desk

Table 3: OMO  - 30 November 2017

Tenor

Rate (%)

Offer (NBn)

Sub (N'bn)

Sale (N'bn)

91 day

NIL

50.00

2.08

No Sale

189 day

NIL

150.00

59.72

No Sale

Source: CBN


Money Market
The OBB and OVN rates spiked to 25.83% and 29.08%, from 11% levels the previous day. This came on the backdrop of the retail SMIS by the CBN. System liquidity is consequently estimated to close today at c.N150bn short from a positive opening figure of N51bn. We expect rates to remain elevated on Monday, with the CBN expected to continue its FX and OMO T-bill sales. We however expect inflows from expected FAAC allocations to state and local govts.  to moderate funding costs as soon as they are released. 

Table 4: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

25.83

11.17

Overnight (O/N)

29.08

11.92

Source: FMDQ, Zedcrest Research 

FX Market
The CBN Official spot rate fell by 0.08% to N306.00/$ from its previous day rate of N305.75/$, even as it conducted another round of FX interventions via a retail SMIS. Rates at the Investors and exporters FX window closed at N360.65/$ from N360.02/$ in the previous session. Rates at the parallel market however appreciated to N361.30/$.  


Table 5: FX Rates

 

Current (N/$)

Previous  (N/$)

CBN Spot

306.00

305.75

CBN SMIS

330.00

330.00

I&E FX Window

360.65

360.02

Parallel Market

361.30

361.70

Source: CBN, FMDQ, REXEL BDC 

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

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