Bond Yields rise by 13bps with slight profit taking on the 20-yr

Proshare

Thursday January 15, 2018/6.00pm/Zedcrest Capital 

KEY INDICATORS

Inflation

15.90%

Declined by 0.01% in November from 15.91% in October 2017

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting of November 2017

External Reserves

$39.53billion

Accreted 1.79% as at 12th January from $39.47 as at 11th January 2017

Brent Crude

$69.93pb

Fell by 1.41% from $68.96pb on 12th January 2018

 

Bonds
The Bond market traded on a relatively quiet note, even as yields retraced by c.13bps on the backdrop of a relative absence of demand and slight profit taking on the 20-yr. This further brings to bear the fact that there’s been very weak local appetite for bonds at these levels, with offshore clients been the major drivers in recent times. In absence of any renewed foreign interests, yields may rise further. Any level above 13.5% especially on the long end should however result in renewed buying from local and offshore clients alike, barring any surprises from the soon to be released FGN bond calendar. 

Table 1: Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

13.59

13.52

0.34

15.54 13-Feb-20

13.36

13.29

0.13

14.50 15-Jul-21

13.34

13.27

0.16

16.39 27-Jan-22

13.34

13.27

0.10

14.20 14-Mar-24

13.46

13.39

0.12

12.50 22-Jan-26

13.41

13.34

(0.02)

16.29 17-Mar-27

13.47

13.40

0.21

12.15 18-Jul-34

13.41

13.34

0.05

12.40 18-Mar-36

13.36

13.29

0.08

16.25 18-Apr-37

13.36

13.29

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Zedcrest Dealing Desk 

Treasury Bills
The T-bills market traded on a slightly bearish note, due to weak demand for bills amid a continued mop up in liquidity via an OMO T-bill and Wholesale FX sale by the CBN. The exception however was the 19-Apr bill which is the next 91-day bill to be issued at the NTB auction for Wednesday. Its yield declined by c.90bps to sub-13% levels. Average T-bill yields however rose marginally by 3bps t0 14.71%.  We expect continued interest on the 19-Apr and 19-Jul bills ahead of the NTB auction scheduled for Wednesday.


Table 2: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

18-Jan-18

14.00

13.75

0.00

1-Feb-18

14.30

14.05

0.00

1-Mar-18

13.90

13.65

(0.10)

5-Apr-18

14.00

13.75

0.00

3-May-18

14.20

13.95

(0.10)

14-Jun-18

14.40

14.15

0.20

5-Jul-18

13.90

13.65

0.10

2-Aug-18

14.00

13.75

0.00

20-Sep-18

13.90

13.65

0.00

4-Oct-18

14.00

13.75

0.15

1-Nov-18

13.55

13.30

0.00

Source: Zedcrest Dealing Desk

Money Market
The OBB and OVN rates rose slightly to 10.83% and 11.54%, on the backdrop of outflows for OMO T-bill (c.N13bn) and wholesale FX sales (c.N69bn) by the CBN. System Liquidity is consequently estimated to close today at C.N48bn long, following inflows from C.N34bn bond coupon payment on the 2021s. We expect rates to decline slightly tomorrow as market players anticipate release of the retail FX refunds by the CBN

 

Table 3: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

10.83

9.00

Overnight (O/N)

11.54

9.58

Source: FMDQ, Zedcrest Research 

Table 4: OMO Auction Result

Tenor

Rate (%)

Offer (NBn)

Sub (N'bn)

Sale (N'bn)

73 days

Nil

30.00

Nil

Nil

164 days

14.40

50.00

12.80

12.80

 

 FX Market

The CBN Official spot rate remained stable at its previous day rate of N305.80/$. Rates at the Investors and exporters FX window depreciated by 0.07% to N360.65/$. Rates at the parallel market also depreciated further by 0.06% to N362.20/$ for the fourth consecutive trading session.

Table 5: FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.80

305.80

CBN SMIS

330.00

330.00

I&E FX Window

360.65

360.41

Parallel Market

362.20

362.00

Source: CBN, FMDQ, REXEL BDC


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

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