CBN Cuts 1yr OMO rate by 70bps following N1.2trn Demand

Proshare

 Friday March 01, 2019 / 08:00 AM / Zedcrest Capital

***Rally on 10-Year FGN Bond Push Yields 20bps Lower***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.37%

As at February 15, 2019. A c.7bps decline from 11.44% recorded in December 2018

MPR

14.00%

Left Unchanged for the 15th Consecutive Time at the Jan. 22, 2019 MPC Meeting

External Reserves

$42.31bn

As at February 23, 2019. A c.0.12% decrease from $42.33bn on February 22, 2019

Brent Crude

$66.32pb

As at February 28, 2019. A c.0.73% decrease from $66.81pb on February 27, 2019

 

Bonds

The FGN Bond Market remained significantly bullish in today’s session with demand witnessed mostly from offshores on the 2028 bond which compressed by c.43bps to trade as low as 13.90% during the session. We also witnessed sustained interests on the longer dated bonds which traded as low as 13.80% on the 36s and 37s. Yields were consequently lower by c.20bps on average.

 

Due to the significant cut in the 1yr OMO rate by the CBN today, and the sustained interests from offshore clients, we maintain a bullish stance on the market, whilst also advocating for cautious trading at these levels.

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.47

13.51

(0.37)

16.39 27-Jan-22

14.59

13.81

(0.13)

12.75 27-Apr-23

14.01

13.51

0.00

14.20 14-Mar-24

14.28

13.66

(0.12)

13.53 23-Mar-25

14.28

13.77

0.00

12.50 22-Jan-26

14.24

13.63

(0.24)

16.29 17-Mar-27

14.21

13.84

(0.13)

13.98 23-Feb-28

13.97

13.91

(0.43)

12.15 18-Jul-34

14.07

13.78

(0.33)

12.40 18-Mar-36

14.03

13.84

(0.37)

16.2499 18-Apr-37

14.02

13.80

(0.21)

Source: Zedcrest Dealing Desk

 

Treasury Bills

The T-bills market remained firmly bullish following the signifcant level of demand at the previous day’s NTB auction. We consequently witnessed a continued rally on the longer tenor bills down to c.13.50%, whilst market players awaited the OMO auction by the CBN.

In tune with the significant demand levels, the OMO auction by the CBN was significantly oversubscribed with total demand of c.N1.37trn of the N350bn offered. Given the significant demand (N1.21trn) on the 364-day bill, the CBN cut the stop rate by 70bps to 14.30% whilst making a total sale of N927bn on the Tenor. Subscriptions on the 91- and 182 day offers, were however fully sold, with rates maintained at their previous levels of 11.90% and 13.50% respectively.

Given the amount of lost bids on the 364-day bill (c.N295bn), we expect demand on the long tenors to remain strong in tomorrow’s session. Rates on the shorter tenors may however trend slightly higher as liqudiity pressures mount.

OMO Auction result

Tenor

Rate (%)

Offer (N’bn)

Sub (N'bn)

Sale (N'bn)

91 day

11.90

50.00

55.51

55.51

182 day

13.50

100.00

92.59

92.59

364 day

14.30

250.00

1,217.10

927.75

 

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Mar-19

10.00

5.00

(0.50)

4-Apr-19

11.00

5.00

(0.50)

2-May-19

10.80

9.00

0.30

13-Jun-19

10.00

5.00

0.00

18-Jul-19

12.60

12.35

0.20

1-Aug-19

12.25

12.00

(0.05)

12-Sep-19

13.20

12.80

(0.30)

3-Oct-19

13.75

13.35

(0.15)

14-Nov-19

13.80

13.30

(0.55)

5-Dec-19

14.00

13.50

(0.25)

2-Jan-20

14.00

13.75

(0.50)

6-Feb-20

14.00

13.60

(0.50)

Source: Zedcrest Dealing Desk

 

Money Market

Rates in the money market rose higher by c.4pct following the significant OMO sale by the CBN which was slightly moderated by some retail FX refunds later in the day. The OBB and OVN rates consequently ended the session at 13.17% and 14.25% respectively.

We expect rates to trend higher tomorrow, with the Bi-weekly retail FX funding by banks expected to cancel out inflows from FAAC payments into the system.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

13.17

9.50

Overnight (O/N)

14.25

10.58

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, rates remained unchanged at N306.85/$ (Spot) and N356.97/$ (SMIS). The NAFEX rate in the I&E window appreciated further by 0.05% to N360.99/$. At the parallel market, the cash and transfer rates remained unchanged at N358.00/$ and N366.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.85

306.85

CBN SMIS

356.97

356.97

I&E FX Window

360.99

361.18

Cash Market

358.00

358.00

Transfer Market

366.00

366.00

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The NGERIA Sovereigns traded on a flat note in today’s session, with bids turning slightly weaker during the session.

 

In the NGERIA Corps, we witnessed significant demand for the FIDBAN 22s which compressed by c.15bps on the day. This is following positive comments by Moody’s on the relatively stronger FCY positions of the Nigerian Banks.


 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

 

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5.      Bullish Sentiment Resurfaces as Average Yield Retreat to 14.2%

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Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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