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Bond Yields Decline on Renewed Buying Interests

Proshare

Monday, November 13, 2017 6:00PM / @ZedcrestCapital

The Bond Market

The bond market opened the week on a slightly bullish note, with demand especially on the 2024 (-5bps) and 2036 (-5bps) bonds.  The 2027 bond was however the most traded with yield compressing slightly by 3bps. Average bond yields consequently declined by 4bps to 14.99% as market players maintained a positive outlook on the market. We expect yields to trend slightly lower tomorrow due to renewed interest on bonds at current levels.

Table 1: FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

15.21

15.14

(0.03)

15.54 13-Feb-20

14.88

14.81

(0.08)

14.50 15-Jul-21

15.08

15.01

(0.06)

16.39 27-Jan-22

14.73

14.66

(0.05)

14.20 14-Mar-24

14.95

14.88

(0.05)

12.50 22-Jan-26

15.09

15.02

(0.05)

16.29 17-Mar-27

15.20

15.13

(0.03)

12.15 18-Jul-34

14.92

14.85

(0.02)

12.40 18-Mar-36

14.92

14.85

(0.05)

16.25 18-Apr-37

14.96

14.89

(0.01)

Source: Zedcrest Dealing Desk

Treasury Bills
The T-bills market opened the week on a relatively quiet note, as market players continued to pour their demand into the OMO auction by the CBN. The CBN sold a total of N4bn 94-day and N61.73bn 185-day bills at 16% and 17.80% respectively. We however witnessed some buying interests on some Dec-17 (-295bps) and Apr-18 (-60bps) bills, as the average T-bills yields declined by 13bps to 18.06%. We expect the market to be slightly bullish tomorrow, ahead of the Primary market auction scheduled for Wednesday. 

Table 2: Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

7-Dec-17

17.00

16.75

0.00

4-Jan-18

17.20

16.95

0.00

1-Feb-18

17.75

17.50

0.25

1-Mar-18

17.60

17.35

0.00

5-Apr-18

17.10

16.85

(0.40)

3-May-18

17.40

17.15

0.00

14-Jun-18

17.85

17.60

0.00

5-Jul-18

17.00

16.75

0.00

2-Aug-18

16.70

16.45

0.00

13-Sep-18

16.30

16.05

0.00

4-Oct-18

15.90

15.65

0.00

Source: Zedcrest Dealing Desk 

Table 3: OMO - 11 November 2017

Tenor

Rate (%)

Offer (NBn)

Sub (N'bn)

Sale (N'bn)

 94 day

16.00

20.00

4.00

4.00

185 day

17.80

80.00

61.73

61.73

Source: CBN


The Money Market
The OBB and OVN rates rose by c.11% to 17.83% and 19.75% due to the combined effect of the OMO T-bill sales (N65.73bn) and Wholesale SMIS by the CBN ($100m). System Liquidity is however estimated to close on a positive note due to cash inflows from retail FX refunds by the CBN which came in after market close. We consequently expect rates to trend lower tomorrow.


Table 4: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

17.83

7.17

Overnight (O/N)

19.75

7.75

Source: FMDQ, Zedcrest Research

The FX Market
The CBN Official spot rate depreciated by 0.02% to N306.00/$ from its previous day rate of N305.95/$. This is following the CBN’s intervention in the market to the tune of $100million via a Wholesale SMIS. Its external reserves is however recorded to have improved by 2.04% to $34.16billion as at 10th of November.

Rates at the Investors and exporters FX window appreciated to N360.20/$ from N360.40/$ in the previous session. The parallel market rate however stayed unchanged at N361.20/$.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.00

305.95

CBN SMIS

330.00

330.00

I&E FX Window

360.20

360.40

Parallel Market

 361.20

361.20

Source: FMDQ, REXEL BDC

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

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