Bond Yields Compress Further on Renewed Local Demand

Proshare

Friday, September 21, 2018    07:30PM / Zedcrest Capital


***NNPC’s trading surplus rises to N17bn in one month***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

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

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$44.94bn

As atSeptember 19, 2018. A c.0.13% decrease from $45.00bnon Sept. 18, 2018

Brent Crude

$79.45pb

As at September21, 2018. A c.1.43% increasefrom$78.31pbon Sept. 20, 2018

 

 

Bonds

Yields in the bond market compressed further by c.13bps in today’s session, capping a 23bps w/w decline in yields. This came on the back of renewed local client interests mostly on the short and mid tenured bonds. We witnessed the most interests today on the 2020, 2021 and 2027 bonds, while other tenors compressed slightly in response to the mild bullish sentiments.

 

In the coming week, we expect a slight reversal to this trend, with bids expected to weaken in anticipation of the forthcoming bond auction. Whilst not discounting the renewed interests from clients in recent sessions, we do not expect yields to break below a c.15.00% support level on the mid to long end of the curve.

 

 

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.86

13.26

(0.57)

14.50 15-Jul-21

15.17

14.97

0.00

16.39 27-Jan-22

14.71

14.33

(0.30)

14.20 14-Mar-24

15.02

14.78

(0.08)

12.50 22-Jan-26

15.10

15.09

(0.10)

16.29 17-Mar-27

15.15

15.07

(0.03)

13.98 23-Feb-28

15.19

15.09

(0.05)

12.15 18-Jul-34

15.37

15.27

(0.03)

12.40 18-Mar-36

15.35

15.30

(0.05)

16.2499 18-Apr-37

15.34

15.28

(0.05)

Source: Zedcrest Dealing Desk 

 

Treasury Bills

 T-bills market traded on a calm note, with yields compressing slightly by c.10bps on average, due to slight buys mostly on the short end of the curve (Oct & Nov maturities), as market players looked to invest excess cash flows in absence of an OMO auction by the CBN. The longer end of the curve was also slightly active with some client flows seen on the 19-Sep.

 

In the coming week, we expect yields to remain relatively stable, as the CBN has begun to show some temperance for liquidity in the system.

  


Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Oct-18

10.55

9.00

(0.45)

1-Nov-18

12.55

11.50

0.05

6-Dec-18

12.50

12.00

(0.15)

3-Jan-19

12.30

12.05

(0.35)

14-Feb-19

12.85

12.60

(0.15)

14-Mar-19

12.55

12.25

(0.05)

4-Apr-19

12.65

12.35

0.00

18-Jul-19

13.00

12.50

0.20

1-Aug-19

13.20

12.70

(0.30)

Source: Zedcrest Dealing Desk 

 

 

 

Money Market

The OBB and OVN rates remained stable, closing today at 4.00% and 4.75% respectively, as there were no significant outflows from the system which opened the day at c.N518bn positive.

 

In the coming week, we expect rates to remain moderated with inflows from OMO maturities and FAAC payments expect to offset outflows for CBN’s OMO and FX auctions.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

4.00

4.17

Overnight (O/N)

4.75

4.75

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, the Naira/USDrate remained stable at N306.30/$ (spot) and N360.94/$ (SMIS).At the I&E FX window a total of $401.69mn was traded in 289 deals, with rates ranging between N358.00/$ - N365.00/$. The NAFEX closing rate depreciatedby c.0.11% to N363.68/$ from N363.27/$ previously.

 

At the parallel market, the cashrates depreciated by 10k to N359.80/$, while the transfer rate remained unchanged at N362.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.30

306.30

CBN SMIS

360.94

360.94

I&E FX Window

363.68

363.27

Cash Market

359.80

359.70

Transfer Market

362.00

362.00

Source: CBN, FMDQ, REXEL BDC 

 

Eurobonds

The NGERIA Sovereignsremained bullish in today’s session, with yields compressing by c.12bps on average, consequently capping a c.14bps w/w decline in yields. Interests were more focused on the shorter end of the curve today, with the most interests seen on the Jan 2021.

 

The NGERIA Corpsremained slightly bullish, with the most interests seen on the Zenith 19s and FBNNL 21s.

 

 

 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

Related News

1.       Average T-Bills Rate Rose 184bps WoW Amidst Buoyant System Liquidity

2.       Bond Yields Moderate Further Amid Tighter Supply

3.       Average T-bills Yield Rose Significantly by 208bps to Close the Week at 14.43%

4.       Markets Take a Breather as CBN Pauses on OMO

5.       Market Players Selloff Bills above 14% as CBN extends OMO offer to the 1-year

6.       Yield Curve Nears Inversion as DMO Clears 1-Year Bill at 15.60% eff. Yield

7.       Market Players Risk off T-bills, as CBN Elongates OMO Tenor above the 300day Mark

8.       Ahead of Next T-bills Auction Scheduled for 12th Sept, 2018

9.       Market Players Demand Higher Rates for OMO, as PMA Approaches

10.   CBN Raises OMO Stop Rates, Succumbs to Investor Pressure PMA Holds this Wednesday

11.   Average T-Bills Yield Rose by 15bps to Close the Week at 12.36%

 

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