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Bond Yields decline on Renewed Demand from Domestic Market Players

Proshare

Friday, November 17, 2017 6:00PM / @ZedcrestCapital

The Bond Market
The bond market ended the week on a bullish note, with renewed demand from local market players taking yields lower by 5bps across the curve. Average bond yields consequently declined to 14.83% from 14.89% in the previous session. We expect yields to trend lower opening next week, as market players anticipate release of Q3 GDP figures and outcome of the MPC meeting.  

Table 1: Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

14.84

14.77

(0.08)

15.54 13-Feb-20

14.77

14.70

(0.11)

14.50 15-Jul-21

15.05

14.98

(0.03)

16.39 27-Jan-22

14.71

14.64

0.00

14.20 14-Mar-24

14.80

14.73

(0.08)

12.50 22-Jan-26

15.02

14.95

(0.03)

16.29 17-Mar-27

14.99

14.92

(0.04)

12.15 18-Jul-34

14.74

14.67

(0.05)

12.40 18-Mar-36

14.73

14.66

(0.06)

16.25 18-Apr-37

14.68

14.61

(0.06)

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Source: Zedcrest Dealing Desk
 

Treasury Bills
The T-bills market was slightly bearish, with slight sell on some short and medium tenured bills, as some banks tried to generate liquidity to fund for their retail FX bids. Average T-bill yields consequently rose slightly by 9bps to 17.98%. We expect yields to trend slightly higher opening next week, with market liquidity expected to get  tighter on further OMO and FX sales by the CBN. 

Table 2: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

7-Dec-17

15.25

15.00

0.25

4-Jan-18

16.50

16.25

0.60

1-Feb-18

17.60

17.35

0.20

1-Mar-18

17.00

16.75

0.40

5-Apr-18

17.15

16.90

0.00

3-May-18

17.45

17.20

0.00

14-Jun-18

17.75

17.50

(0.05)

5-Jul-18

17.25

17.00

0.05

2-Aug-18

16.75

16.50

0.45

13-Sep-18

15.00

14.75

0.00

4-Oct-18

15.50

15.25

0.00

Source: Zedcrest Dealing Desk  

The CBN sold a total of N121million (97-day) and N65.90billion (216-day) bills at its OMO auction today, with rates maintained at 16% and 17.80% respectively.
 

Table 3: OMO  - 17 November 2017

Tenor

Rate (%)

Offer (NBn)

Sub (N'bn)

Sale (N'bn)

 97 day

16.00

30.00

0.121

0.121

216 day

17.80

70.00

65.90

65.90

Source: CBN  

The
Money Market

The OBB and OVN rates spiked to 26.67% and 27.67% from 7% levels in the previous session. This was on the backdrop of the OMO T-bill and retail SMIS by the CBN. Market liquidity is consequently estimated to close at N101bn negative, from a positive opening figure of N165billion. We expect rates to trend higher on Monday, due to expected OMO and wholesale SMIS by the CBN.
 


Table 4: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

26.67

6.17

Overnight (O/N)

27.67

6.67

Source: FMDQ, Zedcrest Research 

The FX Market
The CBN Official spot rate remained stable at its previous day rate of N305.95/$. Its external reserves is also recorded to have improved by 2.04% to $34.33billion as at 15th of November 2017. Rates at the Investors and exporters FX window depreciated to N360.40/$ from N359.56/$ in the previous session. The parallel market however remained stable at its previous day rate of N362.50/$. 

Table 5: FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.95

306.00

CBN SMIS

330.00

330.00

I&E FX Window

359.56

360.42

Parallel Market

362.50

362.50

Source: CBN, FMDQ, REXEL BDC 

For more details email research@zedcrestcapital.com or call the dealing desk via 01-6311667 

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