Bond Yields Compress following Demand on the Bond Yields

Proshare

Friday, July 27, 2018 /06:00PM / Zedcrest Capital

***NBS to Publish Q2 GDP Report on Monday***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at July 23, 2018, 38bps down from 11.61% recorded in May 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$47.26bn

As at July25, 2018. A c.0.08% decreasefrom $47.30bn as at July 24, 2018.

Brent Crude

$74.52pb

As at July 27, 2018. A c.0.73% decreasefrom$75.07pb as atJuly26, 2018

 

 

Bonds

The Bond market closed the week on a slightly more active note, with spreads getting tighter across the curve. This came on the back of some demand especially on the mid tenured bonds (27s & 28s) which compressed yields by c.17bps, consequently reversing some of the losses from the previous session. Bond coupon payments totaling c.N50bn were paid to holders of the Jan-2022 maturity and this is believed to have supported some of the bullish sentiments, with clients opting for more of the higher coupon bonds.

 

In the coming week, we expect the market to be largely order driven, but with yields expected to track slightly higher in line with the general weakness in the broader market sentiment. The NBS is expected to release the Q2 GDP report on Monday, our expectations are for a slower rate of growth which adds to our slightly bearish outlook.

 

 

FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.23

13.01

(0.73)

14.50 15-Jul-21

13.56

13.44

(0.21)

16.39 27-Jan-22

13.39

13.27

(0.23)

14.20 14-Mar-24

13.77

13.56

(0.10)

12.50 22-Jan-26

14.10

14.04

(0.02)

16.29 17-Mar-27

13.96

13.93

(0.14)

13.98 23-Feb-28

14.30

14.28

(0.07)

12.15 18-Jul-34

14.23

14.08

(0.03)

12.40 18-Mar-36

14.27

14.16

(0.05)

16.2499 18-Apr-37

14.17

14.09

(0.07)

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

Activities in the T-bills market were mixed, with some sell on the short end and slight demand for the longer tenured bills. Yields consequently tracked higher by c.5bps on average. We witnessed the most selloff on the 31-Jan (+25bps), while market players were mostly bullish on the 21-Mar (-70bps).

In the Coming week, the CBN will conduct an NTB Auction on Wednesday to rollover c.N207bn PMA maturities. There is also c.N324bn OMO T-bills maturing on Thursday. In line with our expectations for a continued moderation in system liquidity by the CBN, we expect yields in the Secondary market to remain relatively stable over the course of the week.

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

13-Sep-18

11.20

11.00

0.15

4-Oct-18

10.25

9.40

(0.05)

1-Nov-18

10.85

10.60

0.00

6-Dec-18

12.10

11.85

0.00

3-Jan-19

11.95

11.65

0.05

14-Feb-19

12.10

12.00

(0.02)

14-Mar-19

12.10

11.00

0.05

4-Apr-19

12.00

11.00

(0.05)

18-Jul-19

11.45

11.10

0.00

Source: Zedcrest Dealing Desk

 

 

Money Market

The OBB and OVN rates declined slightly to close the week at 6.83% and 7.25% respectively, as system liquidity was bolstered by c.N50bn inflows from bond coupon payments which partially offset system outflows for today’s bond auction settlement.  System liquidity is consequently estimated to close be unchanged at c.250bn positive.

In the coming week, rates are expected to trend higher over the course of the week, in tune with expectations for increased liquidity outflows via expected OMO and FX (wholesale/Retail) interventions by the CBN.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

6.83

7.33

Overnight (O/N)

7.25

7.92

Source: FMDQ, Zedcrest Researc h

 

 

FX Market

The Naira remained stable at N305.90/$ in the Inter-bank market, whilst depreciating further by 0.12% to N362.28/$ at the I&E window. The Parallel market rates remained flat, closing at N358.50/$ and N361.50/$ at the Cash and transfer market segments respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.90

305.90

CBN SMIS

330.00

330.00

I&E FX Window

362.28

361.86

Cash Market

358.50

358.50

Transfer Market

361.50

361.50

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The Nigerian Sovereignswere slightly bullish, with yields compressing by c.4bps across the curve. The most interestswere still on the 2047s, which gained about 0.50pct d/d.

Investors were also slightly bullish on the Nigerian Corporates, with most interest seen on the SEPLLN 23s which gained about 0.50pct on the day.

 

 Proshare Nigeria Pvt. Ltd.




Related News

1.       DMO Publishes 2017 Debt Sustainability Analysis

2.      DMO Raises N66.9bn at the July 2018 FGN Bond Auction

3.      Bond Yields Trend Higher as Market players Cut losses on the 10-Yr

4.      Bond Yields Expected to Tick Higher following Weak Auction Results

5.      Key Message On 8.25% US$300m FBN Finance Co BV Subordinated Callable Note Due 2020

6.      Nigeria’s MPC retains benchmark rates, leans toward tighter policy

7.      Average T-Bills Rates Settle At 11.4% as June Inflation Prints At 11.2% Ahead Of MPC Meeting

8.      June 2018 Inflation figure posts at 11.23%, markets shrug in reaction

9.      Fixed Income Market Monitor- The Open Buy Back Rate (OBB) Rose by 6.08% to 15.00% WoW

10.   CBN commences sale of Chinese Renminbi at its retail auction

11.    FMDQ Lists N10.69bn Pioneer FGN Green Bond

12.   DMO Lists N10.69bn FGN Sovereign Green Bond on NSE 

READ MORE:
Related News
SCROLL TO TOP