Bond Yields Test Key Support as Offshore Inflows Bolster NAFEX Rate

Proshare

Tuesday, January 15, 2018/ 08:30PM / Zedcrest Capital


***Sub-Saharan Africa to grow 3.8% in 2019*** - IMF

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at December 14, 2018. A c.2bps increase from 11.26% recorded in October 2018

MPR

14.00%

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

External Reserves

$43.10bn

As at January 14, 2018. A c.0.09% increase from $43.06bn on January 11, 2018

Brent Crude

$60.09pb

As at January 15, 2019. A c.0.55% increase from $59.76pb on January 14, 2018

 

Bonds

Bond yields compressed further in today’s session, with demand mostly focused on the higher coupon bonds (22s, 27s and 37s). The 2027s which witnessed the most interest, hit a 15% support after compressing by c.30bps on the day. This came on the back of fund re-investments by some clients in the wake of the c.N106bn coupon payments this week.

 

There are more coupon payments expected in the coming week, and we consequently expect this trend to persist, but with yields expected to remain supported at c.15% as traders anticipate release of the Q1 FGN bond calendar.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.14

14.88

0.00

14.50 15-Jul-21

15.50

15.09

0.08

16.39 27-Jan-22

15.03

14.76

0.04

14.20 14-Mar-24

15.07

14.75

(0.03)

12.50 22-Jan-26

15.46

15.16

(0.09)

16.29 17-Mar-27

15.08

15.00

(0.30)

13.98 23-Feb-28

15.49

15.20

(0.01)

12.15 18-Jul-34

15.40

15.17

(0.08)

12.40 18-Mar-36

15.39

15.06

(0.09)

16.2499 18-Apr-37

15.23

14.96

(0.06)

Source: Zedcrest Dealing Desk 

 

Treasury Bills

Yields in the T-bills market moderated further in today’s session, as market players renewed interests on some attractive tenors mostly on the shorter end of the curve. The CBN however conducted a further OMO auction, with a total sale of c.N22bn, as it sought to mop up the c.N41bn coupon inflows into the system.

The CBN on behalf of the FG will conduct an NTB auction tomorrow, with a total of c.N225bn NTB maturities to be rolled over. We expect subscriptions at the auction to remain moderately robust, but with stop rates expected to clear marginally higher due to the increased volumes on offer.

NTB Auction Expectations

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

5.85

10.90 - 11.10

10.90

182 days

26.60

13.00 - 13.30

13.10

364 days

193.00

14.30 - 14.60

14.50

Source: Zedcrest Research

 

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Feb-19

14.85

14.30

(0.15)

14-Mar-19

14.80

13.85

(0.60)

4-Apr-19

13.90

13.65

(0.15)

2-May-19

14.00

13.10

(0.50)

13-Jun-19

13.35

13.10

(0.25)

18-Jul-19

14.00

13.15

0.25

1-Aug-19

14.30

13.65

(0.25)

12-Sep-19

14.85

14.65

(0.05)

3-Oct-19

14.90

14.65

(0.05)

14-Nov-19

14.80

14.55

(0.10)

5-Dec-19

15.10

15.00

0.00

Source: Zedcrest Dealing Desk

 

Money Market

Rates in the money market retraced by c.10pct in today’s session, as market players were able to access the CBN SLF window to fund their obligations. The OBB and OVN rates consequently closed the day at 21.67% and 24.17% respectively, even as system liquidity remained pressured at c.N130bn negative.

We expect rates to remain at these levels, as there are no significant inflows expected tomorrow.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

31.67

20.00

Overnight (O/N)

35.25

22.50

Source: FMDQ, Zedcrest Research


FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.85/$ at the spot market, while the CBN strengthened the SMIS rate by c.0.44% to N356.73/$. The NAFEX rate in the I&E window also appreciated by c.0.19% to a YTD low of N363.61/$ following increased FX supply from offshores into the market. The cash and transfer rates at the parallel market however remained pressured, rising by 0.06% and 0.14% to N361.00/$ and N365.50/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.85

306.85

CBN SMIS

356.73

358.31

I&E FX Window

363.61

364.30

Cash Market

361.00

360.80

Transfer Market

365.50

365.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereigns remained relatively stable, with yields moderating by c.3bps on the back of interest mostly on the 27s and 47s.

 

In the NGERIA Corps investors were mostly bullish on the FBNNL 21s and FIDBAN 22s.

 

 

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

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