CBN Mops up Excess OMO Inflows as SLF Window hits a Record Zero Patronage

Proshare

Thursday, August 2, 2018 /06:20PM / Zedcrest Capital

***Bank of England raises interest rates to 0.75%***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at July 23, 2018, 38bps down from 11.61% recorded in May 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$47.12bn

As at July31, 2018. A c.0.08% decreasefrom $47.16bn as at July 30, 2018.

Brent Crude

$73.39pb

As at August 2, 2018. A c.1.13% decreasefrom$72.57pb as atAugust 1, 2018


Bonds

The Bond market remained scantily traded, with slight demand mostly on the 28s and 36s taking yields lower by c.2bps on average. The 2027 bond however weakened further by c.2bps in line with our expectations for a shift by market players towards the higher yielding maturities.

 

We expect this trend to persist, with spreads expected to remain relatively tight on the mid to long end of the curve.

 

 

FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.18

12.81

(0.08)

14.50 15-Jul-21

13.58

13.35

(0.02)

16.39 27-Jan-22

13.71

13.53

0.04

14.20 14-Mar-24

13.72

13.54

(0.14)

12.50 22-Jan-26

14.09

14.01

(0.02)

16.29 17-Mar-27

14.00

13.96

0.02

13.98 23-Feb-28

14.23

14.17

(0.05)

12.15 18-Jul-34

14.20

14.05

0.02

12.40 18-Mar-36

14.17

14.10

0.00

16.2499 18-Apr-37

14.11

14.04

(0.01)

Source: Zedcrest Dealing Desk

Treasury Bills

The T-bills market traded on a relatively flat note as the CBN intervened in the market via a c.N363bn OMO T-bill sale to mop up the c.N379bn OMO T-bill maturities. We however witnessed some bullish sentiments on the 30-Aug and 18-Jul maturities, which came on the back of the buoyant level of system liquidity and some client interests on the longer end of the curve.

We expect yields to close the week on a relatively stable note, with the surplus system liquidity expected to be moderated by expected debits for Retail FX provisioning by banks. A further OMO auction sale by the CBN couldhowever tighten system liquidity and cause yields to tick higher.

OMO Auction Results (2August 2018)

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

91 days

11.05

200.00

58.95

58.95

203 days

12.15

400.00

304.00

304.00

 

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

13-Sep-18

11.30

10.55

0.05

4-Oct-18

10.20

8.90

(0.05)

1-Nov-18

11.00

10.75

0.25

6-Dec-18

12.00

11.65

0.00

3-Jan-19

12.05

11.70

0.05

14-Feb-19

12.10

11.95

0.02

14-Mar-19

12.10

11.00

(0.05)

4-Apr-19

12.10

11.00

0.00

18-Jul-19

11.20

10.90

(0.15)

Source: Zedcrest Dealing Desk

 

Money Market

The OBB and OVN rates inched slightly higher to close today at 3.33% and 4.25% respectively, following the c.N363bn OMO T-bill sale by the CBN to mop up excess inflows of c.N379bn from OMO T-bill maturities. System liquidity however remained significantly buoyant at c.N520bn est, even as the CBN SLFhit a record zero patronage level.

 

We expect rates to inch slightly higher tomorrow, due to anticipated provisioning for retail FX purchase by banks.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

              3.33        

2.92

Overnight (O/N)

4.25

3.75

Source: FMDQ, Zedcrest Researc h

 

FX Market

The Naira weakened by 0.02% to N305.95/$ (from N305.90/$ previously)at the interbank market. It however remained relatively stable at the I&E FX window, closing at N362.31/$ (from N362.33/$ previously).At the parallel market, the cash and transfer market rates depreciated by 10k and 50k to N358.50/$ and N361.50/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.95

305.90

CBN SMIS

330.00

330.00

I&E FX Window

362.31

362.33

Cash Market

358.50

358.40

Transfer Market

361.50

361.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns traded with mixed sentiments, with yields on the short end of the curve (21s – 23s) compressing by c.4bps, while the longer end of the curve (27s - 47s) pushed higher by c.4bps average. We witnessed most gains on the Jan 2021 (-8bps), while the most sell off was seen on the Feb 2038 which rose by c.7bps (-65ppt)

 

Activities in the NGERIA Corps were relatively quiet, except for slight buys on the Access 21s and Zenith 22s, and some pull back witnessed on the SEPLLN 23s which last traded at c.100.20 (9.18%) from a high of c.101.20 (8.85%) in the previous session.

 

 

 Proshare Nigeria Pvt. Ltd.




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