Bond Yields Weaken Following Renewed Local Supply on the Long End

Proshare

Tuesday, September 18, 2018    07:25 PM / Zedcrest Capital

***CBN, BPE sign sale of 12.69bn FG shares in Minting Company***- Vanguard

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at September14, 2018,9bps up from 11.14% recorded in July 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$45.07bn

As atSeptember 17, 2018. A c.0.27% decrease from $45.19bnon Sept. 14, 2018

Brent Crude

$78.71pb

As at September18, 2018. A c.0.00% increasefrom$78.71pbon Sept. 17, 2018

 

 

Bonds

The bond market remained largely order driven, with yields weakening by c.2bps on average, following slight sell on the longer end of the curve.

 

Market players will remain cautious as they monitor developments at tomorrow’s T-bills PMA. We expect the market to remain largely order driven, with the longer end expected to weaken further in favor of the mid tenured bonds.

 

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.44

13.92

(0.01)

14.50 15-Jul-21

15.28

15.15

0.02

16.39 27-Jan-22

15.08

14.81

0.08

14.20 14-Mar-24

15.10

14.99

0.03

12.50 22-Jan-26

15.23

15.11

0.02

16.29 17-Mar-27

15.25

15.14

0.03

13.98 23-Feb-28

15.30

15.22

0.00

12.15 18-Jul-34

15.42

15.31

(0.01)

12.40 18-Mar-36

15.39

15.33

0.01

16.2499 18-Apr-37

15.40

15.29

0.03

Source: Zedcrest Dealing Desk 

 

Treasury Bills

Except for the continued interests on the Oct maturities which have now compressed by c.200bps wtd, yields remained relatively unchanged across other tenors as market players stayed on the sidelines in anticipation of a second NTB PMA for the month.

 

At the PMA tomorrow, we expect rates to inch higher on the 364-day bill from 13.50% previously. 


NTB - 19 September 2018

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

5.40

11.00 - 11.50

11.00

182 days

8.39

12.20 - 12.50

12.30

364 days

168.36

13.50 - 14.00

13.50

Source: Zedcrest Research

 

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Oct-18

12.00

11.00

(1.00)

1-Nov-18

13.00

12.75

(0.50)

6-Dec-18

13.00

12.75

(0.70)

3-Jan-19

13.50

13.00

(0.25)

14-Feb-19

13.30

13.15

(0.30)

14-Mar-19

13.10

12.85

(0.40)

4-Apr-19

13.25

12.70

(0.50)

18-Jul-19

13.30

12.70

(0.50)

1-Aug-19

13.70

13.00

(0.10)

Source: Zedcrest Dealing Desk 

 

 

Money Market

The OBB and OVN rates moderated slightly to close at 9.50% and 10.25% respectively. This came on the back of inflows of c.N41bn from coupon payments on the March 2036 bond. System liquidity which opened the day at c.N253bn is consequently estimated to close at c.N294bn positive.

 

We expect the rates to remain stable in the interim, as there are no significant outflows anticipated.

 

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

9.50

11.83

Overnight (O/N)

10.25

12.67

Source: FMDQ, Zedcrest Research

 

FX Market

The Naira/USD rate remained stable at the interbank, closing at N306.30/$ (Spot) and N359.85/$ (SMIS).  At the I&E FX window, a total of $491.37mn was traded in 305deals, with rates ranging between N358.00/$ - N364.75/$. The NAFEX closing rate depreciatedby c.0.10% to N362.93/$ from N362.93/$ previously.

 

At the parallel market, the cashrates and transfer rates remained unchanged at N359.50/$ and N362.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.30

306.30

CBN SMIS

359.85

359.85

I&E FX Window

363.30

362.93

Cash Market

359.20

359.50

Transfer Market

362.00

362.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereigns weakened further, with yields inching higher by c.7bps on average. We witnessed the most selloff on the Feb 2038s which rose by c.10bps d/d.

 

The NGERIA Corps were mixed, with slight sell seen on the GRTBNL 18s, ACCESS 21s and FBNNL 21s, while investors showed firm interests on the DIAMBK 19s which gained c.0.30pct on the day.

 

 

 Proshare Nigeria Pvt. Ltd.

 

Related News

1.       Average T-Bills Rate Rose 184bps WoW Amidst Buoyant System Liquidity

2.       Bond Yields Moderate Further Amid Tighter Supply

3.       Average T-bills Yield Rose Significantly by 208bps to Close the Week at 14.43%

4.       Markets Take a Breather as CBN Pauses on OMO

5.       Market Players Selloff Bills above 14% as CBN extends OMO offer to the 1-year

6.       Yield Curve Nears Inversion as DMO Clears 1-Year Bill at 15.60% eff. Yield

7.       Market Players Risk off T-bills, as CBN Elongates OMO Tenor above the 300day Mark

8.       Ahead of Next T-bills Auction Scheduled for 12th Sept, 2018

9.       Market Players Demand Higher Rates for OMO, as PMA Approaches

10.   CBN Raises OMO Stop Rates, Succumbs to Investor Pressure PMA Holds this Wednesday

11.   Average T-Bills Yield Rose by 15bps to Close the Week at 12.36%

 

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