Bond Yields Pare Losses amid Renewed Local Demand

Proshare

Wednesday, December 12, 2018/ 07:24AM / Zedcrest Capital

***Nigeria budget minister expects economy to grow by 3 pct. in 2019***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.26%

As at November 21, 2018. A c.2bps down from 11.28% recorded in September 2018

MPR

14.00%

Left Unchanged for the 12th Consecutive Time at the Nov. 22, 2018 MPC Meeting

External Reserves

$42.80bn

As at December 11, 2018. A c.0.12% increase from $42.75bn on December 10, 2018

Brent Crude

$60.75pb

As at December 12, 2018. A c.0.25% decrease from $60.90pb on December 11, 2018

 

Bonds

The FGN Bond market pared some of its previous session’s losses, with yields compressing slightly by c.4bps on average, following slight demand from local client orders.

 

Yields are expected to maintain their current flattish trend, as dearth of FPI flows continue to weigh on sentiments in the market.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.24

14.95

(0.04)

14.50 15-Jul-21

15.72

15.45

(0.05)

16.39 27-Jan-22

15.13

14.92

(0.08)

14.20 14-Mar-24

15.29

15.19

(0.03)

12.50 22-Jan-26

15.84

15.74

(0.02)

16.29 17-Mar-27

15.75

15.66

(0.04)

13.98 23-Feb-28

15.93

15.80

(0.05)

12.15 18-Jul-34

15.75

15.60

0.00

12.40 18-Mar-36

15.72

15.64

(0.04)

16.2499 18-Apr-37

15.60

15.49

(0.04)

Source: Zedcrest Dealing Desk

 

Treasury Bills

Yields in the T-bills market compressed marginally by c.2bps avg., despite the continued OMO auction by the CBN. This was as market players cherry-picked on yields on some short tenured maturities, in anticipation of inflows from c.N551bn OMO maturities tomorrow, which is expected to elevate system liquidity from its current negative position.

 

We however expect the CBN to intervene in the market with a longer tenured OMO offering (>300days), in a bid to mop up all maturities, in tune with its aggressive stance on system liquidity.

 

Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Jan-19

15.00

14.00

(1.00)

14-Feb-19

15.00

14.00

0.10

14-Mar-19

14.50

14.25

0.25

4-Apr-19

14.30

12.85

(0.20)

2-May-19

13.05

12.90

0.00

18-Jul-19

14.00

12.75

0.00

1-Aug-19

15.00

14.50

0.00

12-Sep-19

15.10

14.90

0.10

3-Oct-19

15.10

14.80

0.00

14-Nov-19

15.05

14.80

0.05

Source: Zedcrest Dealing Desk

 

Money Market

Rates in the money market remained relatively stable from their previous day levels, with the OBB and OVN rates closing slightly lower at 56.67% and 62.50% respectively. This was inspite of the c.N26bn OMO sale today, which is expected to have tightened system liquidity further to c.N90bn Negative.

We expect rates to further moderate in view of the c.N551bn in OMO maturities tomorrow.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

56.67

65.00

Overnight (O/N)

62.50

70.92

Source: FMDQ, Zedcrest Research 

 

 

FX Market

At the Interbank, the Naira/USD spot rate remained stable at N306.90/$, while the SMIS rate weakened slightly by c.0.01% to N359.24/$. At the I&E FX window, the NAFEX closing rate appreciated firmly by c.0.12% to close at N364.77/$ from N365.21/$ previously.

 

At the parallel market, the cash and transfer rate appreciated by 0.39% and 0.54% to N362.00/$ and N366.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.90

306.90

CBN SMIS

359.24

359.16

I&E FX Window

364.77

365.21

Cash Market

362.00

363.40

Transfer Market

366.00

368.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereigns were stronger in today’s session, following renewed buying interests mostly on the mid to long end of the curve. Yields consequently compressed by c.7bps on average.

 

In the NGERIA Corps, investors were bearish on the DIAMBK 19s and Access 21s Sub, whilst we continued to see interest on the ACCESS 21s Snr and the UBANL 22s.

 

 

Proshare Nigeria Pvt. Ltd.

 

 

 Proshare Nigeria Pvt. Ltd.

 

 

 

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3.       Average Money Market Rate Rose to 8.24% to Settle at 25.21%

4.       Could The US Market Rally Signal A Coming Recession?

5.       Tight System Liquidity Pushes Funding Rates to a One Month High

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7.       Fixed Income Market Maintains Bearish Posture As The CBN Carries On With OMO Auctions

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