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Bond market closes positive as CBN maintains cut in OMO rates

Proshare

Friday, November 24, 2017 5:18PM/ Zedcrest Capital 

Table 1:Key Indicators

Inflation

15.91%

Declined by 0.07% in October from 15.98% in September 2017

MPR

14.00%

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

External Reserves

$34.49billion

Accreted by 2.04% as at 23rd November from $34.46bn on 22nd November 2017

Brent Crude

$63.39pb

Rose by 0.51% from $62.88pb on 23rd November 2017


Bonds

The bond market closed the week on a relatively calm note, with slight buys on some maturities compressing yields by an average of 6bps. Average bond yield consequently declined to 14.59%, from 14.65% in the previous session. We expect this trend to persist opening next week, as market players cautiously hold on to their long positions, in anticipation of a further decline in yields. 
 

Table 2:Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

14.69

14.62

(0.08)

15.54 13-Feb-20

14.36

14.29

(0.22)

14.50 15-Jul-21

14.77

14.70

(0.06)

16.39 27-Jan-22

14.42

14.35

0.00

14.20 14-Mar-24

14.70

14.63

(0.10)

12.50 22-Jan-26

14.65

14.58

(0.10)

16.29 17-Mar-27

14.82

14.75

(0.03)

12.15 18-Jul-34

14.47

14.40

(0.05)

12.40 18-Mar-36

14.59

14.52

0.04

16.25 18-Apr-37

14.45

14.38

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Source: Zedcrest Dealing Desk 

Treasury Bills
The T-bills market was slightly bullish, with slight buys witnessed on some short to medium term maturities. This is coming on the backdrop of a continued 5bps decline in OMO T-bill rates witnessed in the last two trading sessions. The OMO rate on the 209-day bill offered today was also cut by 5bps, with a total sale of N173billion by the CBN at 17.65%. Likewise, the Rate on the 90-day bill offered was cut by 5bps to 15.90%, with a total sale of N140million. We expect the market to open next week on a relatively quiet note, as market players are expected to be constrained by the tight liquidity in the system. 

Table 3:Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

7-Dec-17

15.60

15.35

0.00

4-Jan-18

16.40

16.15

(0.15)

1-Feb-18

16.80

16.55

0.00

1-Mar-18

15.40

15.15

(0.60)

5-Apr-18

16.90

16.65

(0.10)

3-May-18

17.55

17.30

(0.05)

14-Jun-18

17.55

17.30

0.00

5-Jul-18

17.30

17.05

(0.20)

2-Aug-18

16.75

16.50

0.00

13-Sep-18

15.00

14.75

0.00

4-Oct-18

15.25

15.00

0.00

Source: Zedcrest Dealing Desk 
 

Table 4: OMO  - 24 November 2017

Tenor

Rate (%)

Offer (NBn)

Sub (N'bn)

Sale (N'bn)

 90 day

15.90

20.00

0.14

0.14

209 day

17.65

70.00

173.41

173.41

Source: CBN 


Money Market
The OBB and OVN rates spiked to 30.83% and 32.58% from 11% levels the previous day. This was due to debits for bond auction (N87bn) and the significant OMO T-bill sale by the CBN. Market liquidity is consequently estimated to close at N167billion short, from a positive opening figure of N93billion. We expect rates to remain elevated on Monday due to expected OMO T-bill and FX sales by the CBN. This is however barring an early payment of retail FX refunds by the CBN.


Table 4: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

30.83

11.83

Overnight (O/N)

32.58

11.96

Source: FMDQ, Zedcrest Research  

FX Market
The CBN Official spot rate remained stable at its previous day rate of N305.85/$. Its external reserves is also recorded to have improved by 2.04% to $34.49billion as at 23rd of November 2017. Rates at the Investors and exporters FX window closed at N360.25/$ from N360.27/$ in the previous session. Rates at the parallel market however stayed flat at its previous day rate of N361.80/$.

 

Table 5:FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.85

305.85

CBN SMIS

330.00

330.00

I&E FX Window

360.25

360.27

Parallel Market

361.80

361.80

Source: CBN, FMDQ, REXEL BDC 

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

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