Bond Yields Moderate Further Amid Tighter Supply

Proshare

Monday, September 17, 2018    10.25 PM / Zedcrest Capital

*** High Oil Price Pushes Subsidy on Petrol to N65.60 per Litre*** - Thisday

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at September 14, 2018, 9bps up from 11.14% recorded in July 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$45.20bn

As at September 14, 2018. A c.0.07% decrease from $45.23bn on Sept. 13, 2018

Brent Crude

$78.71pb

As at September 17, 2018. A c.0.28% increase from $78.49pb on Sept. 14, 2018

 

 

Bonds

Yields in the bond market declined further in today’s session, compressing by c.9bps d/d. This came as some market players looked to re-invest expected proceeds from Bond coupon payments on the 2027 and 2036 bonds, whilst tighter supply forced yields to moderate across the curve.

 

Whilst this trend may persist in the interim, we expect pressures from continued rise in T-bills yields as well as renewed supply at the forthcoming bond auction to push yields higher towards month end.

 

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.45

13.89

(0.24)

14.50 15-Jul-21

15.26

15.13

(0.13)

16.39 27-Jan-22

15.00

14.64

(0.17)

14.20 14-Mar-24

15.07

14.99

(0.08)

12.50 22-Jan-26

15.21

15.11

(0.03)

16.29 17-Mar-27

15.22

15.10

(0.04)

13.98 23-Feb-28

15.30

15.21

0.02

12.15 18-Jul-34

15.43

15.40

(0.08)

12.40 18-Mar-36

15.38

15.26

(0.09)

16.2499 18-Apr-37

15.37

15.27

(0.09)

Source: Zedcrest Dealing Desk 

 

Treasury Bills

Yields in the T-bills market declined further due to the absence of an OMO auction by the CBN, which forced market players to re-invest excess cash flows mostly at the short end of the curve.

 

Market players remained cautious on the mid to long end, with interests in those segments mostly client driven. We remain wary of a further uptick in rates ahead of the forthcoming PMA, with a likely resumption in OMO auctions by the CBN expected to pressure rates higher in the interim.

 

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Oct-18

13.00

12.00

(1.55)

1-Nov-18

13.50

13.10

(0.65)

6-Dec-18

13.70

13.50

(0.80)

3-Jan-19

13.75

13.20

(0.25)

14-Feb-19

13.60

13.40

(0.40)

14-Mar-19

13.50

12.80

0.30

4-Apr-19

13.75

13.00

(0.25)

18-Jul-19

13.80

12.70

(0.20)

1-Aug-19

13.80

13.00

(0.20)

Source: Zedcrest Dealing Desk 

  

Money Market

The OBB and OVN rates remained above single digits, closing today 11.83% and 12.67% respectively. The rates remained slightly pressured due to outflows for a wholesale FX auction by the CBN. System liquidity which opened the day at c.N293bn positive is consequently estimated to close at c.N264bn.

 

Barring a renewed OMO auction by the CBN, rates should remain relatively stable tomorrow.

 

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

11.83

10.67

Overnight (O/N)

12.67

12.00

Source: FMDQ, Zedcrest Research

 

FX Market

The Interbank spot rate depreciated by 0.02% to N306.30/$, while the SMIS rate remained unchanged at N359.85/$.  At the I&E FX window, a total of $598.44mn was traded in 250 deals, with rates ranging between N358.00/$ - N364.75/$. The NAFEX closing rate appreciated by c.0.07% to N362.93/$ from N363.18/$ previously.

 

At the parallel market, the cash rates remained stable at N359.50/$, while transfer rates depreciated by 50k to N362.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.30

306.25

CBN SMIS

359.85

359.85

I&E FX Window

362.93

363.18

Cash Market

359.50

359.50

Transfer Market

362.00

361.50

Source: CBN, FMDQ, REXEL BDC

  

Eurobonds

The NGERIA Sovereigns weakened a bit in today’s session, following slight selloff on the longer end of the curve. Investors have however remained favorably disposed to the tickers, especially those on the shorter end of the curve.

 

The NGERIA Corps were also slightly bearish, with some selloff seen on the ACCESS 21s and UBANL 22s. We however witnessed slight interests on the FBNNL 21s which gained c.0.12pct on the day.

 

 Proshare Nigeria Pvt. Ltd.

 
Proshare Nigeria Pvt. Ltd.

Related News

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

2.       Markets Take a Breather as CBN Pauses on OMO

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

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

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

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

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

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

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

10.   Yields Trend Higher following Hike in CBN OMO Stop Rate

11.   Central Bank makes a U-turn, raises rate to 12.50% for the 182days OMO Bills

12.   System Liquidity support bullish interests in the Fixed Income Markets

13.   External Factors Propel Yields to New Frontiers

 

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