Bond yields Test 15% levels amid continued Offshore Selloff

Proshare
Saturday, August 17, 2018 /07:24AM / Zedcrest Capital

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.14%

As at August 15, 2018, 9bps down from 11.23% recorded in June 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$46.46bn

As at August 15, 2018. A c.0.11% decrease DoD, 2.15% drop MoM

Brent Crude

$71.69pb

As at August 17, 2018. A c.0.51% increase DoD, from $71.33pb (August 16, 2018)

 

 

Bonds

The bearish sentiment in the Bond market persisted in today’s session, due to renewed selloff mostly from offshore clients. We witnessed the most selloff on the 2027s which hit an intra-day high of 15.01% during the trading session. Yields consequently closed at c.14.83%, 30bps higher than their previous day’s levels.

 

We expect this bearish trend to persist amidst continued pressure on EM assets. We however expect intermittent demand from local clients looking to take advantage of higher yields in the market.

 

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.13

13.75

0.27

14.50 15-Jul-21

14.70

14.50

0.39

16.39 27-Jan-22

14.51

14.15

0.58

14.20 14-Mar-24

15.01

14.33

0.44

12.50 22-Jan-26

15.06

14.90

0.26

16.29 17-Mar-27

14.99

14.91

0.20

13.98 23-Feb-28

14.96

14.90

0.18

12.15 18-Jul-34

14.99

14.70

0.32

12.40 18-Mar-36

15.02

14.91

0.23

16.2499 18-Apr-37

14.95

14.81

0.11

Source: Zedcrest Dealing Desk

 

Treasury Bills

The T-bills market traded on a slightly bearish note with some selloff witnessed on the mid to long end of the curve. The relatively buoyant level of system liquidity however spurred some buying interest on the shorter end of the curve, as yields inched higher by c.11bps across the curve.

We expect the market to remain scantily traded in the coming week, and with a slightly bearish posture due to the relatively subdued market interests on T-bills at current yield levels.

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

13-Sep-18

10.55

10.30

0.35

4-Oct-18

11.50

10.50

0.00

1-Nov-18

12.00

11.55

0.20

6-Dec-18

12.25

12.10

0.10

3-Jan-19

12.35

12.15

0.00

14-Feb-19

12.40

12.00

0.00

14-Mar-19

12.30

12.15

0.15

4-Apr-19

12.20

12.00

0.05

18-Jul-19

12.14

11.55

0.14

Source: Zedcrest Dealing Desk 

 

Money Market

The OBB and OVN rates remained relatively stable to close the week at 7.33% and 8.33% respectively. This came as the significantly buoyant liquidity levels (c.N800bn opening today) offset the outflows for retail FX funding and bond auction debits, totaling c.340bn est., with net system liquidity consequently estimated to close the week at c.460bn positive.

 

We expect rates to remain relatively stable over the course of the new week, with OMO maturities totaling c.N364bn expected to hit the system on Thursday.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

7.33

7.83

Overnight (O/N)

8.33

8.50

Source: FMDQ, Zedcrest Research
 

FX Market

The Naira/USD rate remained unchanged at the interbank and I&E FX window, closing at N306.10/$ and N362.53/$ respectively. It however appreciated by 0.08% to close at N359.50/$ at the cash market, while transfer rates traded flat at N362.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.10

306.10

CBN SMIS

352.00

352.00

I&E FX Window

362.50

362.53

Cash Market

359.50

359.80

Transfer Market

362.00

362.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA sovereigns traded on a relatively calm note in today’s session, with yields remaining relatively unchanged from their previous levels.

 

Trading on the NGERIA Corps were mixed, with slight interest witnessed on the FIDBAN 22s and SEPLLN 23s, while we witnessed some pull back on the DIAMBK and Zenith 19s.

 
Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.

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