Bond Yields Trend Higher as Market Players Stay Risk Off

Proshare

Friday, November 02, 2018/ 08.26PM / Zedcrest Capital


***Global banks HSBC, UBS close Nigeria offices, foreign investment falls***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at October 16, 2018, 5bps up from 11.23% recorded in August 2018.

MPR

14.00%

Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting

External Reserves

$41.95bn

As at November 1, 2018. A c.0.12% decrease from $42.00bn on October 31, 2018

Brent Crude

$72.80pb

As at November 2, 2018. A c.0.10% decrease from $72.87pb on November 1, 2018

 

 

Bonds

The bond market remained bearish in today’s session, with increased selloffs pressuring yields higher by c.13bps across the curve. The recent selloffs have now pushed yields above the 15.50% mark on most of the mid and long tenured bonds, with selloffs most notable on the 2028 and 2034 bonds, which traded as high as 15.74% and 15.68% in today’s session.

 

The market looks to now be net long of bonds from a prior net short positon in the previous month. Given the recent wave of selloffs and weaker local client interests, we expect these bearish pressures to persist, with a 16% level for bonds now in the horizon as market players maintain a relatively risk off stance across the curve.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.54

14.32

0.08

14.50 15-Jul-21

15.69

15.03

0.31

16.39 27-Jan-22

14.97

14.18

0.15

14.20 14-Mar-24

15.34

15.22

0.03

12.50 22-Jan-26

15.65

15.39

0.10

16.29 17-Mar-27

15.62

15.45

0.05

13.98 23-Feb-28

15.78

15.66

0.04

12.15 18-Jul-34

15.90

15.58

0.26

12.40 18-Mar-36

15.69

15.37

0.10

16.2499 18-Apr-37

15.50

15.28

0.21

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The Tbills market was dominated by interests on the shorter end of the curve, mostly on the Nov maturities, due to the relatively buoyant level of liquidity in the system. Market players however stayed flat on most other maturities, due to expectations for continued OMO auctions at more attractive levels on the mid and long tenors.

 


In the coming week, we expect the market to trend slightly bearish, with expectations of a renewed tightening of system liquidity via further OMO and FX interventions by the CBN.

 

Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

6-Dec-18

12.10

11.90

(0.90)

3-Jan-19

12.75

12.30

(0.25)

14-Feb-19

12.75

12.50

0.00

14-Mar-19

12.80

12.55

(0.20)

4-Apr-19

12.75

12.25

(0.25)

18-Jul-19

13.00

12.70

0.00

1-Aug-19

13.95

13.40

(0.05)

12-Sep-19

14.35

14.15

(0.15)

3-Oct-19

14.35

14.15

0.05

Source: Zedcrest Dealing Desk

 

 

Money Market

In line with our expectations, the OBB and OVN rates remained relatively unchanged at 4.08% and 4.83%, as system liquidity improve significantly to c.N810bn on the back of some unidentified inflows from the CBN.

 

On the back of the robust system liquidity levels, we expect rates to remaining moderated opening next week.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

4.08

4.50

Overnight (O/N)

4.83

4.92

Source: FMDQ, Zedcrest Research 

 

 

FX Market

At the Interbank, the Naira/USD rate remained stable at N306.60/$ (spot), while the SMIS rate was eased by the CBN to N361.45/$ from N362.82/$ previously. At the I&E FX window a total of $231.24mn was traded in 284 deals, with rates ranging between N358.00/$ - N365.00/$. The NAFEX closing rate depreciated by c.0.06% to N363.74/$ from N364.54/$ previously.

 

At the parallel market segment, the cash and transfer rates remained unchanged, closing at N361.00/$ and N364.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.60

306.60

CBN SMIS

361.45

362.82

I&E FX Window

363.74

363.54

Cash Market

361.00

361.00

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereigns regained some grounds in today’s session, as yields compressed by c.10bps on average, with the most interests seen on the 2038 (+0.60pct) and 2047 (+0.70pct) PX gains.

               

In the NGERIA Corps, clients showed the most interests on the SEPLLN 23s which gained c.0.40pct on the day. Interests were also seen on the ACCESS 21s (both), ZENITH 22s and UBANL 22s.

 

 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


 

Related News

 

  1. Bond Yields Trend Higher as Supply Pressures Persist
  2. FBNQuest Merchant Bank Limited Commercial Paper - Offer Extension Till Nov 02
  3. Bond Yields Close Bearish for the Month amid OMO rate Hikes and Slight Offshore Sell
  4. Treasury Bill Auction Schedule For October 31st 2018
  5. Funding Rates Moderate as FAAC Inflows Bolster System Liquidity
  6. Seychelles launches World’s First Sovereign Blue Bond
  7. Bond Bears Take the Day, with Rout on the Mid Tenors
  8. Expensive Domestic Debt Whets Appetite For More Eurobonds
  9. Money Market Rate Decreases as Overnight Rate Falls to 11.42%
  10. Inflows from Paris Club Refunds Bolster System Liquidity amid SMIS Outflows

 

READ MORE:
Related News
SCROLL TO TOP