Bond Yields Trend Higher Following Sell off on the 10-Year

Proshare

Wednesday, April 03, 2019  08:22 AM / Zedcrest Capital

***FEC Okays N3.4tn Promissory Note to Offset Local Debts, Salaries***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.31%

As at March 15, 2019. A c.6bps decline from 11.37% recorded in January 2019

MPR

13.50%

Cut by 50bps to 13.50% at the Mar. 26, 2019 MPC Meeting

External Reserves

$44.65bn

As at April 2, 2019. A c.0.09% increase from $44.61bn on April 1, 2019

Brent Crude

$69.32pb

As at April 3, 2019. A c.0.22% decrease from $69.47pb on April 2, 2019

 

 

Bonds

The FGN Bond market traded on weaker note in today’s session, with yields ticking higher by c.7bps on average, following slight selloff on the 2028s and 2037s with yields traded as high as 14.50% and 14.33% respectively.

 

The bearish sentiment in the market came mostly on the back of some information on the possibility for a longer tenured bond in the Q2 calendar to be released shortly by the DMO. We however anticipate a slightly lower amount of bond issuance in Q2 19, with an estimated monthly amount of c.N80bn from now to year end, compared to the average monthly amount of c.N125bn in Q1 19.


Yields are expected to remain slightly pressured, as selling interests persist in the market.

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.73

14.12

0.10

16.39 27-Jan-22

14.27

13.99

(0.05)

12.75 27-Apr-23

14.34

13.98

0.02

14.20 14-Mar-24

14.34

13.91

0.00

13.53 23-Mar-25

14.55

14.29

0.23

12.50 22-Jan-26

14.62

14.37

0.19

16.29 17-Mar-27

14.45

14.32

0.04

13.98 23-Feb-28

14.58

14.44

0.22

12.15 18-Jul-34

14.43

14.28

0.09

12.40 18-Mar-36

14.35

14.29

(0.03)

16.2499 18-Apr-37

14.33

14.24

0.00

Source: Zedcrest Dealing Desk

 

 

 

Treasury Bills

The T-bills market traded on a relatively flat note, with market players constrained by the tight system liquidity levels, whilst shifting focus to the CBN’s NTB auction where stop rates cleared higher owing to the signifcant OMO sale in the previous session.

We expect yields to remain elevated, with the possibility for a further OMO intervention by the CBN due to the c.N108bn in OMO maturities expected tomorrow. A further drain in system liquidty could however spark some bearish pressures as banks project for the bi-weekly Retail FX funding on Friday.

NTB PMA Result

Tenor

Rate (%)

Offer (₦’bn)

Sub (₦'bn)

Sale (₦'bn)

91-days

10.29

10.00

20.09

10.00

182-days

12.60

17.60

22.97

17.60

364-days

12.85

68.08

153.99

68.08

Source: CBN

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Apr-19

11.25

10.00

0.00

2-May-19

12.25

11.50

0.00

13-Jun-19

12.00

11.20

0.00

18-Jul-19

12.20

12.00

0.00

1-Aug-19

13.10

12.95

(0.15)

12-Sep-19

12.95

12.85

0.00

3-Oct-19

13.10

13.00

0.00

14-Nov-19

13.10

12.95

0.15

5-Dec-19

12.95

12.75

0.15

2-Jan-20

13.05

12.85

0.10

6-Feb-20

11.25

10.00

0.00

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates in the money market remained relatively unchanged from previous levels, as system liquidity remained subdued at c.N36bn opening the day. The OBB and OVN rates consequently ended the session at 16.71% and 17.50% respectively.

We expect rates to moderate slightly tomorrow, on the back of the expected OMO inflows. This is however barring a significant further OMO sale by the CBN.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

16.71

16.57

Overnight (O/N)

17.50

17.43

Source: FMDQ, Zedcrest Research


 

FX Market

At the Interbank, the Naira/USD rate was unchanged at N307.00/$ (spot) and N355.78/$ (SMIS). The NAFEX closing rate in the I&E window however weakened slightly by 0.07% to N360.55/$, as market turnover dropped by 59% to $165m. At the parallel market, the cash rate depreciated by 0.06% to N358.20/$ whilst the transfer rate remained unchanged at N364.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

307.00

307.00

CBN SMIS

355.78

355.78

I&E FX Window

360.55

360.30

Cash Market

358.20

358.00

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

Interests on the NGERIA Sovereigns remained relatively muted in today’s session, with yields ticking marginally higher by c.1bp on the day.

 

In the NGERIA Corps, Investors remained well bid on the DIAMBK 19s, UBANL 22s and FIDBAN 22s                                                                                                                                                             

 

 

Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.




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