CBN Holds Off on OMO Sale as Funding Rates Moderate

Tuesday, February 12,  2019  08:10 PM / Zedcrest Capital

***Oil Jumps As Saudis Plan Further Production Cuts***

KEY INDICATORS

Bonds

The Bond market traded on a slightly bearish note on the back of continued profit taking mostly on the 2028s, while bids got weaker across the curve, as market sentiments dampened in anticipation of the February Bond auction scheduled to hold next week.

We expect yields to remain slightly bearish into the new week, with possibility for a further uptick in yields closer to the 15% mark.

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market remained slightly bearish on the back of the liquidity squeeze in the money market which caused yields to tick marginally higher by c.5bps on the day. The CBN also floated a further OMO auction with market players bidding for c.N22bn of the N65bn offered. The CBN however held off on sales, most likely due to the significant funding constraints in the system.

The CBN will conduct an NTB Auction on behalf of the FG tomorrow, with c.N154bn of the 91, 182 and 364-day bills on offer. Given expectations by market players for continued OMO auctions by the CBN, we do not expect any significant changes in stop rates from previous levels.

Source: Zedcrest Research

Source: Zedcrest Dealing Desk

Money Market

Rates in the money market moderated by c.20pct as banks were able to access the CBN’s SLF window to fund their obligations, while the CBN also held off on a further OMO sale in a bid to alleviate the significant funding pressures in the system. The OBB and OVN rates consequently ended the session at 24.17% and 27.50% respectively.

We expect rates to remain elevated tomorrow, as there are no significant inflows expected.

Source: FMDQ, Zedcrest Research

FX Market

At the Interbank, the Naira/USD rate depreciated by 0.02% to N306.75/$ at the spot market, while the SMIS rate remained unchanged at N357.10/$. The NAFEX rate in the I&E window however appreciated by c.0.02% to N361.87/$. At the parallel market, the cash rate depreciated by c.0.28% to N360.00/$ while the transfer rate remained unchanged at N365.00/$.

Source: CBN, FMDQ, REXEL BDC

Eurobonds

Renewed interests in the NGERIA Sovereigns push yields lower by c.14bps, with the rally mostly fostered by the positive gains in oil market following plans by the Saudi Government to implement further production cuts.

In the NGERIA Corps, investors remained slightly bearish on the UBANL 22s, whilst yields remained relatively flat on other tickers.

Related News

1.       Funding Rates Spike to YTD High as CBN Drains System Liquidity into Negative

2.      January 2019 FGN Bond Auction Oversubscribed

3.      Money Market Rate Increased As Overnight Rate Rose To 11.86%

4.      Flour Mills Commercial Paper Offers 14.75% Yield; Offer Closes On Wednesday

5.      Monthly Fixed Income Review For January 2019

6.      Bond Market Maintains Bullish Trend as Panic Buying Sets In

7.      NAFEX Rate Appreciates to Six Month High Amid Renewed FPI Inflows

8.     A Quiet Trading Session as Daily OMO Auction Takes Centre Stage

9.      Market Players Oversubscribe CBN OMO Amid Increased Demand on Short Tenor Bills

10.  NSP-SPV Plc Up to N10Billion 15-Year Series 1 Guaranteed Fixed Rate Senior Green Infrastructure Bond

11.   Buoyant Liquidity Level Spurs Buying Interest as Average Yield Compresses to 13.2%WoW