Bond Yields Weaken by c.10bps W/W, as Demand Pressures Wane

Proshare
Friday, October 19, 2018 / 07:58PM / Zedcrest Capital

***FG trims budget size, proposes N8.6tn for 2019***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at October16, 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

$42.78bn

As atOctober18, 2018. A c.0.14% decrease from $42.84bnon October17, 2018

Brent Crude

$80.15pb

As at October 19, 2018. A c.0.49% increasefrom$79.76pbon October 18, 2018

 

 

Bonds

The bond market remained scantily traded in today’s session, with slight sell on some mid to long end maturities lifting yields marginally higher by c.1bp on average. In view of the weaker levels of demand witnessed during the week yields closed c.10bps higher W-o-W, with yields inching higher to c.15.00% on average.

 

In the coming week, we expect yields to remain slightly pressured, with bids expected to get weaker on the longer end in anticipation of the forthcoming FGN bond auction on Wednesday the 24th of October.

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.11

13.55

0.00

14.50 15-Jul-21

14.93

14.59

0.00

16.39 27-Jan-22

14.69

14.06

0.03

14.20 14-Mar-24

15.15

15.01

(0.01)

12.50 22-Jan-26

14.93

14.86

0.00

16.29 17-Mar-27

15.11

15.07

0.01

13.98 23-Feb-28

15.30

15.25

0.01

12.15 18-Jul-34

15.34

15.25

0.04

12.40 18-Mar-36

15.29

15.12

0.00

16.2499 18-Apr-37

15.19

15.10

0.01

Source: Zedcrest Dealing Desk 

 

Treasury Bills

The T-bills market traded with mixed sentiments during the day, as market players cherrypicked on some maturities on the shorter end of the curve (Nov Maturities) while we witnessed slight risk off selling on the longer end. Yields cosnequently compressed slightly by c.10bps on the day.

 

In the coming week, we expect yields to trend slightly higher, due to expectations for a further tightemning of system liqudity via expected OMO and FX interventions by the CBN. 

 


Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

1-Nov-18

13.40

13.30

(0.25)

6-Dec-18

13.10

12.85

0.00

3-Jan-19

13.30

12.70

(0.20)

14-Feb-19

13.40

12.85

0.30

14-Mar-19

13.25

12.85

0.25

4-Apr-19

12.70

12.50

(0.05)

18-Jul-19

13.60

12.75

0.10

1-Aug-19

13.70

13.10

0.20

12-Sep-19

13.95

13.75

0.05

3-Oct-19

13.80

13.70

0.15

Source: Zedcrest Dealing Desk

 

 

Money Market

In line with our expectations, the OBB and OVN rates remained relatively unchanged from their previous levels, closing today at 12.67% and 13.33%, with system liquidity estimated to close the week relatively unchanged from its opening levels of c.N109bn positive today.

 

We expect rates to trend higher opening next week, due to expected funding for a Wholesale SMIS by the CBN on Monday.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

12.67

13.33

Overnight (O/N)

13.33

14.58

Source: FMDQ, Zedcrest Research 

 

 

FX Market

At the Interbank, the Naira/USD rate remained stable at N306.50/$ (spot) and N362.52/$ (SMIS). At the I&E FX window a total of $168.96mn was traded in 388 deals, with rates ranging between N360.00/$ - N365.20/$. The NAFEX closing rate appreciated by c.0.09% toN364.02/$ from N364.33/$ previously.

 

At the parallel market, the cash rate appreciated by 30k to N360.20/$, while the transfer rate remained unchanged at N364.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.50

306.50

CBN SMIS

362.52

362.52

I&E FX Window

364.02

364.33

Cash Market

360.20

360.50

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns were relatively flat, as sell pressures thinned out. Yields were however higher by c.1bp on the day, while they compressed by c.5bps w/w.

               

In the NGERIA Corps, interests were mostly focused on the shorter dated tickers (19s -21s), while the longer dated tickers weakened slightly, having posted decent gains earlier in the week. .

 

 

 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

 

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