Bond Yields Compress Further as Coupon Expectations Sustain Buying Interests

Proshare

Monday, January 14, 2018/ 05:30PM / Zedcrest Capital

***Nigeria and South Africa to recover slowly in 2019 *** - Moody’s

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at December 14, 2018. A c.2bps increase from 11.26% recorded in October 2018

MPR

14.00%

Left Unchanged for the 12th Consecutive Time at the Nov. 22, 2018 MPC Meeting

External Reserves

$43.05bn

As at January 10, 2018. A c.0.00% increase from $43.05bn on January 9, 2018

Brent Crude

$59.76pb

As at January 14, 2019. A c.0.95% increase from $60.54pb on January 13, 2018

 

Bonds

In line with our expectations, yields in the bond market moderated further by c.2bps, even as offers pulled further away following demand on the mid to long end of the curve, especially the 27s and 37s.

 

We expect yields to remain moderated for most of the week as inflows from coupon payments are expected to support bullish sentiments in the near term.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.14

14.47

0.11

14.50 15-Jul-21

15.42

15.12

(0.08)

16.39 27-Jan-22

14.99

14.70

0.00

14.20 14-Mar-24

15.10

14.75

0.00

12.50 22-Jan-26

15.55

15.35

(0.01)

16.29 17-Mar-27

15.38

15.27

(0.07)

13.98 23-Feb-28

15.50

15.33

(0.04)

12.15 18-Jul-34

15.48

15.24

(0.02)

12.40 18-Mar-36

15.48

15.24

(0.03)

16.2499 18-Apr-37

15.29

15.19

(0.10)

Source: Zedcrest Dealing Desk

 

Treasury Bills

Yields in the T-bills market moderated slightly in today’s session as market players cherry-picked on some maturities in anticipation of client demand ahead of the forthcoming NTB auction. This was despite the c.25bn OMO sale by the CBN.

We expect yields to remain relatively stable on the back of expected client flows into the market.

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Feb-19

15.00

14.00

0.00

14-Mar-19

15.40

13.80

0.30

4-Apr-19

14.05

13.80

0.05

2-May-19

14.50

13.00

0.20

13-Jun-19

13.60

13.25

0.00

18-Jul-19

13.75

13.20

(0.25)

1-Aug-19

14.55

13.65

(0.05)

12-Sep-19

14.90

14.60

(0.10)

3-Oct-19

14.95

14.60

(0.10)

14-Nov-19

14.90

14.60

(0.10)

5-Dec-19

15.10

14.90

0.00

Source: Zedcrest Dealing Desk

 

Money Market

Rates in the money market spiked by c.12pct, with the OBB and OVN rates closing the day at 31.67% and 35.25% respectively. This came on the back of a wholesale FX intervention by the CBN which is estimated to have worsened system liquidity to c.N225bn negative as at COB today.

We expect rates to remain elevated, as there are no significant inflows expected tomorrow.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

31.67

20.00

Overnight (O/N)

35.25

22.50

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, the Naira/USD rate appreciated by c.0.02% to N306.85/$ at the spot market, while the SMIS rate remained unchanged at N358.13/$. The NAFEX rate in the I&E window appreciated by c.0.18% to N364.30/$ from N364.94/$ previously, while the cash and transfer rates remained unchanged at N360.80/$ and N365.00/$ respectively at the parallel market.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.85

306.90

CBN SMIS

358.31

358.31

I&E FX Window

364.30

364.94

Cash Market

360.80

360.80

Transfer Market

365.00

365.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

Investors’ interests on the NGERIA Sovereigns cooled off in today’s session, as yields expanded by c.7bps on average, following slight selloff on the longer end of the curve.

 

In the NGERIA Corps investors renewed interests for the DIAMBK 19s and Zenith 22s.

 


Proshare Nigeria Pvt. Ltd.


 

Proshare Nigeria Pvt. Ltd.

 

 

 

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 Proshare Nigeria Pvt. Ltd.

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