CBN Drains System Liquidity with N129bn OMO Sales

Proshare

Tuesday, December 19, 2017 6:00PM / @ZedcrestCapital 

*** FG offers N10.7bn Green Bonds at 13.48%***
 

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

$36.85billion

Accreted 1.92% as at 14th December   from $36.72 as at 13th December 2017

Brent Crude

$63.12pb

Rose by 0.25% from $62.96pb on 18th December 2017


Bonds
Yields in the bond market declined by 28bps in today’s session, as market players were net buyers of the medium tenured (5 -10yr) and the 20-yr 2037 bonds. Average bond yields consequently fell to 14.06% from 14.34% in the previous session. The decline in yields could be largely attributed to speculative buys by some market players in anticipation of a further compression in the bond yield curve. We however expect a slight uptick in yields tomorrow, due to lack of significant client interest in bonds at current levels.

 

Table 1: Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change   (%)

16.00 29-Jun-19

14.48

14.41

(0.34)

15.54 13-Feb-20

14.12

14.05

(0.49)

14.50 15-Jul-21

13.80

13.73

(0.61)

16.39 27-Jan-22

13.96

13.89

(0.27)

14.20 14-Mar-24

14.06

13.99

(0.35)

12.50 22-Jan-26

14.12

14.05

(0.29)

16.29 17-Mar-27

14.09

14.02

(0.19)

12.15 18-Jul-34

14.03

13.96

(0.17)

12.40 18-Mar-36

14.00

13.93

0.00

16.25 18-Apr-37

13.94

13.87

(0.04)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Zedcrest Dealing Desk
  

Treasury Bills
The T-bills market traded on a relatively quiet note today, with only few trades executed on some Apr - Aug maturities, as the CBN continued its OMO auction, which it resumed in the previous session. A total of N22bn of the 1-Mar and N107bn of the 23-Aug bills were sold by the CBN with stop rates dropping by 5bps to 13.10% and 14.90% respectively. The CBN has signaled its intention to continue its OMO T-bill interventions in order to moderate the amount of liquidity in the system. We consequently expect rates in the secondary market to trade around these levels (13% - 15%) in the near term.

 

Table 2: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

4-Jan-18

12.50

12.25

0.00

1-Feb-18

12.90

12.65

0.00

1-Mar-18

13.30

13.05

(0.30)

5-Apr-18

14.45

14.20

0.15

3-May-18

14.60

14.35

0.00

14-Jun-18

14.70

14.45

0.00

5-Jul-18

14.90

14.65

0.00

2-Aug-18

15.00

14.75

0.00

20-Sep-18

14.50

14.25

0.00

4-Oct-18

14.00

13.75

0.00

1-Nov-18

14.00

13.75

0.00

Source: Zedcrest Dealing Desk  

Treasury Bills
The T-bills market traded on a relatively quiet note today, with only few trades executed on some Apr - Aug maturities, as the CBN continued its OMO auction, which it resumed in the previous session. A total of N22bn of the 1-Mar and N107bn of the 23-Aug bills were sold by the CBN with stop rates dropping by 5bps to 13.10% and 14.90% respectively. The CBN has signaled its intention to continue its OMO T-bill interventions in order to moderate the amount of liquidity in the system. We consequently expect rates in the secondary market to trade around these levels (13% - 15%) in the near term.

Table 2: OMO Auction Result

Tenor

Rate (%)

Offer (NBn)

Sub (N'bn)

Sale (N'bn)

72 day

13.10

50.00

22.38

22.38

247 day

14.90

100.00

107.34

107.34

Source: CBN

Money Market
The OBB and OVN rates rose higher to close today at 17.50% and 18.67%, due to the OMO T-bill sale of c.N129bn by the CBN in today’s session. System Liquidity is consequently estimated to close today at N42bn negative, from a positive opening figure of N90bn. We expect rates to moderate slightly in the coming days, due to expected inflows from FAAC and OMO T-bill maturities. This is however barring significant OMO interventions by the CBN in future sessions.

 

Table 3: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

12.33

3.75

Overnight (O/N)

13.25

4.33

Source: FMDQ, Zedcrest Research

FX Market
The CBN Official spot rate remained unchanged from its previous day rate of N306.20/$. Rates at the Investors and exporters FX window depreciated by 29k to close at N361.25/$. Rates at the parallel market however stayed flat at N363.50/$.
 

Table 4: FX Rates

 

Current (N/$)

Previous (N/$)

CBN Spot

306.20

306.20

CBN SMIS

330.00

330.00

I&E FX Window

361.25

360.94

Parallel Market

363.50

363.50

Source: CBN, FMDQ, REXEL BDC 

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

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