Bond Yields Compress Further as Traders Pull Back on Offers

Proshare

Wednesday, October 03, 2018 / 08: 13AM /  Zedcrest Capital


***Manufacturing PMI Expands at Slower Rate in September*** - CBN

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

$44.31bn

As atSeptember 28, 2018. A c.0.16% decrease from $44.38bnon Sept. 27, 2018

Brent Crude

$84.79pb

As at October 2, 2018. A c.2.14% increasefrom$83.01pbon Sept. 28, 2018

 

 

Bonds

The Bond Market resumed the new month on a slightly bullish note, with yields compressing by c.7bps, following continued interests on the 2020s, 2026s and 2028s. We witnessed a further widening in spreads, as market players pulled back on offers on some short and mid tenured bonds.

 

Despite the bullish run witnessed in recent sessions, our outlook remains bearish due to expectations for weaker growth and higher inflation figures in the months ahead.  In the interim however, the market should remain well bid, with investors expected to continue to favor the short and mid tenured maturities. 

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.63

13.18

(0.45)

14.50 15-Jul-21

14.93

13.78

(0.08)

16.39 27-Jan-22

14.47

13.85

(0.02)

14.20 14-Mar-24

14.98

14.78

0.07

12.50 22-Jan-26

14.80

14.68

(0.17)

16.29 17-Mar-27

15.13

14.93

0.02

13.98 23-Feb-28

15.11

15.06

(0.07)

12.15 18-Jul-34

15.26

15.13

(0.03)

12.40 18-Mar-36

15.22

15.00

0.00

16.2499 18-Apr-37

15.19

15.01

0.00

Source: Zedcrest Dealing Desk 

 

Treasury Bills

The T-bills market traded with mixed sentinments, with some buying interests witnessed earlier in the day, on the short end,due to the relatively buoyant level of system liquidity. We however witnessed a change in sentiments later in the day, with market players taking profits and selling off slightly in anticipation of the PMA Wednesday and a Possible OMO auction on Thursday. Yields were consequently higher by c.8bps on the day.

 

Due to the Buoyant level of liquidity in the system, and renewed appetite by locals at current yield levels, we expect stop rtates at the PMA tomorrow to be much unchanged from their previous levels, whilst we expect a slight uptick in yields in the secondary market. 

 

PMA Expectations

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

9.52

11.00 - 11.20

11.00

182 days

17.60

12.20 - 12.40

12.20

364 days

106.37

13.40 - 13.55

13.48


Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

1-Nov-18

12.25

11.70

(0.75)

6-Dec-18

12.55

12.05

(0.30)

3-Jan-19

12.15

11.90

(0.15)

14-Feb-19

12.65

12.30

0.00

14-Mar-19

12.50

11.75

0.00

4-Apr-19

12.55

11.90

0.15

18-Jul-19

13.00

12.30

0.00

1-Aug-19

13.00

12.40

0.00

12-Sep-19

13.30

12.65

0.00

Source: Zedcrest Dealing Desk

 

 

Money Market

The OBB and OVN rates declined slightly closing today at 4.83% and 5.58%, amid a significantly robust system liquidity level estimated at c.N470bn from c.550bn opening today; the difference being the estimated debit for the wholesale SMIS by the CBN.

 

We expect rates to remain stable tomorrow, as there are no significant outflows anticipated.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

4.83

6.00

Overnight (O/N)

5.58

7.17

Source: FMDQ, Zedcrest Research


FX Market

At the Interbank, the Naira/USDSpot rate depreciated by 0.02% to N360.40/$, while the SMIS rate remained unchanged at N361.34/$. At the I&E FX window a total of $313.30mn was traded in 286 deals, with rates ranging between N358.00/$ - N365.30/$. The NAFEX closing rate appreciated marginally by c.0.01% to N363.88/$ from N363.92/$ previously.

 

At the parallel market, the cash rate remained unchanged at N359.80/$, while the transfer rate depreciated by 0.55% to N364.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.40

306.35

CBN SMIS

361.34

361.34

I&E FX Window

363.88

363.92

Cash Market

359.80

359.80

Transfer Market

364.00

362.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereigns gave up more gains in today’s session with yields rising by c.9bps on the day. We witnessed the losses on the 30-yr, which has now stretched above the 8% mark.

 

The NGERIA Corpswere mostly quiet, except for slight selloff seen on the GRTBNL 18s and a contrasting strengthening of the SEPLLN 23s, which gained +0.40pct on the day, with investors more favorably disposed to the ticker in tune with the recent uptick in oil prices.


 

 Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.


 

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