CBN commences sale of Chinese Renminbi at its retail auction

Proshare

Friday, July 20, 2018 /10:00PM / Zedcrest Capital

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.61%

NBS postpones release date for June 2018 CPI & Inflation report to July 23, 2018.

Expectations range between 10.90% & 11.20%.

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting on April 4, 2018.

Next MPC meeting scheduled for July 23 & 24, 2018

External Reserves

$47.41bn

As at July 19, 2018. A c.0.80% decrease from $47.79bn as at July 2, 2018.

Brent Crude

$72.83pb

As at July 20, 2018. A c.0.26% increase from $72.64pb as at July 19, 2018

 

 

Bonds

The bond market witnessed tepid interest, as yields compressed by c2bps on the average across the curve. Pockets of demand were witnessed at the short to mid-end of the curve particularly on high-coupon bearing instruments such as the 22s & 24s.

 

Market participants remain cautious on bonds with the release of the June 2018 inflation report, Monetary Policy Committee (MPC) meeting and the FGN bond auction all schedule for next week. Expectations for a lower inflation figure (analysts’ forecasts range between 10.90% and 11.20%), and the MPC to steady the course and higher stop rates at the bond auction provide a mix of sentiments for direction of yields in the market.

 

We maintain a bearish outlook on bonds as higher stop rates expected at the auction due to more funding pressure on the Debt Management Office (DMO) should translate into weakened yields in the secondary market.


FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.51

13.04

0.11

14.50 15-Jul-21

13.43

13.28

(0.10)

16.39 27-Jan-22

13.63

13.28

(0.07)

14.20 14-Mar-24

13.82

13.64

(0.16)

12.50 22-Jan-26

14.14

13.98

0.05

16.29 17-Mar-27

13.97

13.93

0.00

13.98 23-Feb-28

14.16

14.07

(0.01)

12.15 18-Jul-34

14.21

14.13

0.01

12.40 18-Mar-36

14.21

14.14

0.00

16.2499 18-Apr-37

14.19

14.11

(0.01)

Source: Zedcrest Dealing Desk


Treasury Bills

The T-bills market was also relatively quiet, with buy activities witnessed on some select maturities. Discount rates compressed by a single basis point on the average across the benchmark securities.

We also maintain a bearish outlook on T-bills as demand continues to slow down. Reduced system liquidity as a result of FX funding should put pressure on T-bills, especially at the short to mid-end of the curve.

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

2-Aug-18

11.05

10.00

0.05

13-Sep-18

11.00

10.25

0.00

4-Oct-18

10.25

10.10

(0.10)

1-Nov-18

11.00

10.80

(0.04)

6-Dec-18

11.95

11.80

(0.10)

3-Jan-19

11.95

11.71

0.15

14-Feb-19

12.05

11.96

(0.01)

14-Mar-19

12.15

11.00

0.00

4-Apr-19

12.15

11.00

0.00

Source: Zedcrest Dealing Desk

 

Money Market

Funding pressures as market participants made provisions for the Retail SMIS FX auction by the CBN saw interbank money market rates increase to close at 15.00% & 15.67% for the Open Buy-Back (OBB) rates and overnight (O/N) respectively.

 

We expect the market liquidity to remain stretched opening and for the most of next week, with some respite expected later in the week from OMO maturities N404.32bn which will be closely monitored by the CBN.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

15.00

6.83

Overnight (O/N)

15.67

7.42

Source: FMDQ, Zedcrest Research

 

FX Market

The Naira maintained its status quo to close the week across the various trading windows, as the Interbank rate closed at N305.85/$ for a third consecutive trading day. The NAFEX rate appreciated by 31k, closing the week at N361.60/$ (from N361.91/$ previously).

 

The Naira also traded relatively flat at the parallel market. The USD cash rate remained stable at N358.70k while the transfer rate depreciated by N0.20k to close the week at N362.50/$ respectively.

 

The CBN commenced the sale of Chinese Renminbi alongside the US Dollars as it took bids for the Retail SMIS FX auction today. This is the first of such bids, following the yuan currency swap deal between Nigeria & China worth the equivalent of $2.4billion since May earlier this year.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.85

305.85

CBN SMIS

330.00

330.00

I&E FX Window

361.60

361.91

Cash Market

358.70

358.70

Transfer Market

362.50

362.30

Source: CBN, FMDQ, REXEL BDC

 

 Eurobonds:

There was demand for NGERIA Sovereigns and NGERIA Corps at the last trading session for the week, as yields compressed by c.8bps & c.6bps on the average respectively.

 

Investor interest in Nigerian dollar-yielding assets continue to strengthen on the back rebounding oil prices.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


 

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