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CBN sells N215bn OMO T-bills to Mop up Excess Liquidity Inflows

Proshare

Thursday, February 1, 2018, 6.00PM/Zedcrest Capital

***Business activities fall as PMI drops to 57.3*** – CBN

KEY INDICATORS

Inflation

15.37%

Declined by 0.54% in December from 15.90% in November 2017

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting of November 2017

External Reserves

$40.63billion

Accreted 1.75% as at 30th January from $40.56 as at 29th January 2017

Brent Crude

$69.57pb

Rose by 1.83% from $68.32pb on 31st January 2018


Bonds
The bond market remained scantily traded in today’s session. We however witnessed slight sell towards the close of trading, especially on the 2034 bond, consequently taking yields c.4bps higher than their previous levels. We expect this slightly bearish trend to persist in the near term, due to dullish trading bias and clients’ preference and expectations for higher yielding instruments in T-bills and corporate bond space. 

Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

13.69

13.62

0.02

15.54 13-Feb-20

13.53

13.46

0.00

14.50 15-Jul-21

13.30

13.23

0.12

16.39 27-Jan-22

13.13

13.06

0.04

14.20 14-Mar-24

13.48

13.41

0.07

12.50 22-Jan-26

13.50

13.43

0.03

16.29 17-Mar-27

13.47

13.40

0.07

12.15 18-Jul-34

13.47

13.40

0.07

12.40 18-Mar-36

13.36

13.29

0.01

16.25 18-Apr-37

13.33

13.26

0.00

 

 

 

 

 

 

 

 

 







Source: Zedcrest Dealing Desk 

Treasury Bills
The T-bills market traded on a slightly bullish note as the market was awash with liquidity from the OMO and Stab SEC maturities. The CBN however offered N350bn OMO T-bills, consequently selling the total amount of N215bn subscribed for by market players, to mop up the excess system liquidity. We expect the market to be relatively quiet tomorrow, as funding for retail FX by banks is expected to weigh on system liquidity.

Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

1-Mar-18

12.50

12.35

0.00

5-Apr-18

13.75

13.60

(0.20)

3-May-18

13.35

13.20

(0.05)

14-Jun-18

14.30

14.15

(0.10)

5-Jul-18

14.05

13.90

0.00

2-Aug-18

13.55

13.40

(0.15)

20-Sep-18

14.20

14.05

(0.05)

4-Oct-18

14.35

14.20

0.00

1-Nov-18

13.75

13.60

0.00

3-Jan-19

13.70

13.55

0.00

Source: Zedcrest Dealing Desk

 

 

 

OMO Auction Result

Tenor

Rate (%)

Offer (NBn)

Sub (N'bn)

Sale (N'bn)

98 day

12.60

100.00

5.00

5.00

266 day

14.40

350.00

210.42

210.42

Source: CBN

Money Market
The OBB and OVN rates declined to 3.83% and 4.83% as inflows of c.N296bn OMO and Stab SEC maturities bolstered system liquidity to over N600bn long.  System liquidity is however estimated to close lower at c.N388bn following the OMO sales by the CBN. We expect rates to close slightly higher tomorrow, due to funding for retail FX bids by banks.
 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

3.83

4.83

Overnight (O/N)

4.67

5.25


Source: FMDQ, Zedcrest Research

FX Market
The CBN Official spot rate depreciated by 0.02% to N305.75/$ from its previous day rate of N305.70/$, with the CBN’s external reserves recorded to have improved by 1.75% to $40.63bn as at 30th January 2018.

The spot rate in the
Investors and Exporters’ FX Window depreciated by 0.16% to close at N360.57/$ from N360.00/$.

Rates in the
Unofficial market appreciated by 0.22% to N361.50/$

FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.75

305.70

CBN SMIS

330.00

330.00

I&E FX Window

360.57

360.00

Parallel Market

361.50

362.30

Source: CBN, FMDQ, REXEL BDC

Related News

1.      CBN sells N253bn T-bills at c.10bps lower than previous Auction Rate

2.      FGN Domestic Debt Service Payment Increased In Line With The Stock of Domestic Debt

3.      Naira Depreciates slightly despite $210m FX intervention by the CBN

4.      Decent Start to the Year for the DMO

5.      Proposed USD2.5billion Eurobond Issuance in Q1 2018

6.      First FGN Bond Auction for the Year Oversubscribed

7.      Slight Rally on Bonds on Prospective Eurobond Issuance by the DMO 

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