Bond Yields Retrace by c.20bps ahead of N90bn Bond Auction

Proshare
Wednesday, April 25, 2018 /8:02AM/Zedcrest Capital

***Nigerian Lawmakers Postpone 2018 Budget Vote until Next Month***

KEY INDICATORS

Inflation

13.34%

Declined by 0.99% in March from 14.33% in February 2018

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting 0n 4 April 2018

External Reserves

$47.01billion

Accreted 1.52% as at 16 April from $46.92bn as at 13 April 2018

Brent Crude

$73.90pb

Rose by 0.16% from $73.78pb on 23 April 2018


Bonds

The bond market turned bearish in today’s session as some market players came down on their long positions ahead of tomorrow’s bond auction. We witnessed most of the sale on the 2034s (c.20bn), with some profit taking also on other medium to long tenured bonds as well. Yields consequently rose by c.20bps, as bids also got weaker on the shorter end of the curve. We expect the market to be  relatively calm in tomorrow’s session, to be largely driven by the level of client demand and expected stop rates at the auction, which is expected to be reasonably moderate around the 12.80 - 13.00 area, hence our stable outlook.

 

FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

11.29

9.98

0.34

15.54 13-Feb-20

11.84

11.36

0.30

14.50 15-Jul-21

12.53

12.19

0.11

16.39 27-Jan-22

12.75

11.88

0.53

14.20 14-Mar-24

13.03

12.81

0.12

12.50 22-Jan-26

13.14

12.71

0.14

16.29 17-Mar-27

13.08

12.86

0.17

12.15 18-Jul-34

13.11

12.90

0.16

12.40 18-Mar-36

12.98

12.68

0.22

16.25 18-Apr-37

12.99

12.73

0.18


Source: Zedcrest Dealing Desk
 

Bond Auction Expectation

Tenor

Offer (N'bn)

Expected Stop Rate (%)

Apr 2023

30.00

12.70 - 12.90

Mar 2025

30.00

12.80 - 13.00

Feb 2028

30.00

12.80 - 13.00


Treasury Bills

The T-bills market remained slightly bullish, as market players shifted attention to the longer end of the curve (Jan - April), which were traded down around the 11.50 - 10.50 area. Yields however stayed relatively flat, compressing marginally by c.3bps, as yields ticked slightly higher on some short and medium tenured maturities.  We expect the market to remain slightly bullish, as market players anticipate inflows from OMO maturities (c.N267bn), Retail FX refunds and FAAC payments on Thursday. This is however expected to be moderated by an OMO auction Sale, Thursday and outflows for Retail SMIS and Bond auction settlement, Friday.

 

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Jun-18

10.50

9.00

(0.90)

5-Jul-18

11.00

9.50

(0.50)

2-Aug-18

10.80

9.80

(0.50)

13-Sep-18

11.00

10.75

(0.20)

4-Oct-18

10.70

10.45

0.20

1-Nov-18

11.60

10.60

0.00

6-Dec-18

11.20

10.95

0.20

3-Jan-19

11.80

10.50

(0.40)

14-Feb-19

11.90

10.40

(0.30)

14-Mar-19

11.70

10.50

(0.50)

Source: Zedcrest Dealing Desk

Money Market

The OBB and OVN rates remained relatively stable, closing at 2.58% and 3.00%. This was as system Liquidity remained relatively unchanged at c.N400bn long. We expect rates to remain relatively stable tomorrow, as there are no significant outflows expected from the system.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

2.58

2.83

Overnight (O/N)

3.00

3.25

Source: FMDQ, Zedcrest Researc h 


FX Market

The Interbank rate remained stable its previous rate of N305.60/$, with the CBN’s external reserves recorded to have improved by 1.53% to $47.01bn as at 16-April. The NAFEX rate appreciated significantly by 0.15% to N360.00/$. Rates in the Unofficial market however remained stable at N361.40/$.

 

FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.65

305.65

CBN SMIS

330.00

330.00

I&E FX Window

360.00

360.54

Parallel Market

361.40

361.40

Source: CBN, FMDQ, REXEL BDC   
 

Eurobonds

The NGERIA Sovereigns recovered fairly from the strong sell offs witnessed in the previous session, as we witnessed renewed demand from investors looking to stake in funds at the relatively more attractive levels on the bonds. Concerns however remain over the continued rise in USTs, with the 10yr bond hitting a 4-yr intra-day high of 3% during today’s session.
 

We also witnessed slight recoveries in the NGERIA Corps, with the Access 21s and the Zenith and FIDBAN 22s regaining most of their losses from the previous session. The SEPLLN 23s remained relatively stable at 101.375/102.125, despite slight profit taking witnessed on the bond.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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