Central Bank Conducts Yet Another OMO Auction in a Bid to Manage Excess Liquidity

Proshare

Tuesday, November 27, 2018/ 04:51PM / Zedcrest Capital

**Eurobonds for oil producing countries and companies remain bearish amidst low crude prices***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.26%

As at November 21, 2018. A c.2bps down from 11.28% recorded in September 2018

MPR

14.00%

Left Unchanged for the 12th Consecutive Time at the Nov. 22, 2018 MPC Meeting

External Reserves

$41.52bn

As at November 22, 2018. A c.0.02% decrease from $41.53bn on November 21, 2018

Brent Crude

$60.06pb

As at November 26, 2018. A c.1.69% decrease from $59.06pb on November 23, 2018

 

Bonds

Risk-off sentiments on FGN Bonds continued today as the market opened the week on quiet note. Market trading volumes remained on a decline with less than N1bn executed intraday, reflecting the weak appetite for FGN bonds.  Consequently, yields traded flat across the curve, with slight sell-off seen at the short-end (2020s) and mid-end of the curve (2027s & 2028s).

 

We expect the market to trade scantily in the interim as investors weigh-in the effects of lower global oil prices on government borrowing cost. We retain a cautious outlook on bonds with a bearish bias till the end of the year.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.00

14.27

0.08

14.50 15-Jul-21

15.35

15.24

0.00

16.39 27-Jan-22

14.96

14.54

0.02

14.20 14-Mar-24

15.28

15.02

0.00

12.50 22-Jan-26

15.66

15.46

0.01

16.29 17-Mar-27

15.70

15.61

0.01

13.98 23-Feb-28

15.90

15.84

0.04

12.15 18-Jul-34

15.71

15.59

(0.01)

12.40 18-Mar-36

15.59

15.43

(0.02)

16.2499 18-Apr-37

15.58

15.45

(0.01)

Source: Zedcrest Dealing Desk

 

Treasury Bills

Trading in the T-bills market was muted on the day as the CBN conducted an unexpected OMO auction, a divergence from the usual OMO T-bills maturity vs OMO auction trend in past sessions. We saw slight bullish sentiments on the short end of the curve, while the medium to long end of the curve traded bearish due to more supply of OMO T-bills.

 

The CBN sold a total of N161.08bn OMO T-bills across two maturities, 192- and 360-days, while maintaining stop rates at 13.00% and 14.50% respectively. There was no sale recorded on the 115-day maturity due to no demand on that maturity.

 

We expect the market to trade bearish tomorrow due to the reduced System Liquidity as well as supply expected from the T-bills PMA to be conducted later in the week.

OMO Auction Result

Tenor

Rate (%)

Offer (₦’bn)

Sub (₦'bn)

Sale (₦'bn)

115 day

Nil

30.00

Nil

No Sale

192 day

13.00

50.00

20.07

19.07

360 day

14.50

100.00

145.51

142.01

 

  

 

Benchmark FGN Treasury Bills

 

Description

Bid (%)

Offer (%)

Day Change (%)

 

6-Dec-18

12.55

12.30

0.05

 

3-Jan-19

12.65

12.40

(0.10)

 

14-Feb-19

13.00

12.80

(0.01)

 

14-Mar-19

13.00

12.70

(0.20)

 

4-Apr-19

12.80

12.45

(0.20)

 

2-May-19

12.85

12.60

0.00

 

18-Jul-19

13.00

12.75

0.00

 

1-Aug-19

13.75

13.25

0.05

 

12-Sep-19

14.55

14.30

0.05

 

3-Oct-19

14.55

14.40

0.05

 

14-Nov-19

14.50

14.35

0.00

 

Source: Zedcrest Dealing Desk

 

Money Market

Money Market rates increased opening the week, off the back of outflows via the CBN’s OMO auction as well SMIS FX Wholesale Intervention conducted today. The OBB & O/N rates closed at 15.17% (from 5.83%) and 15.75% (from 6.58%) respectively. System liquidity is consequently estimated to close lower at c.N118.38bn positive.

We expect rates to remain in double digit territory in the interim as there are no OMO maturities expected this week. However, market participants may get some respite from FAAC payments as the month draws to a close.  

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

15.17

5.83

Overnight (O/N)

15.75

6.58

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank, the Naira/USD rate depreciated by c.0.02bps to close at N306.80/$ (spot), from N306.75/$ previously but remained unchanged at N359.81/$ (SMIS). At the I&E FX window a total of $147.30bn was traded in 303 deals, with rates ranging between N361.00/$ - N365.00/$. The NAFEX closing rate appreciated by c.0.23% to close at N363.85/$ from N364.70/$ previously.

 

At the parallel market segment, the cash and transfer rates both remained unchanged to close N364.00/$ and N366.50/$ respectively.


 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.80

306.75

CBN SMIS

359.81

359.81

I&E FX Window

363.85

364.70

Cash Market

364.00

364.00

Transfer Market

366.50

366.50

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

Recovery in global oil prices was insufficient to provide respite for sovereign papers of oil producing countries, and the NGERIA Sovereigns were no exception. Yields on the NGERIA Sovereigns inched up further by c.7bps on the average across all the tickers on the curve. The major losers on the day were the NGERIA 21s and NGERIA 23s losing c.13bps and c.17bps respectively.

 

NGERIA Corps showed continued weakness amidst low oil prices. Yield expanded the most on the SEPLLN 23s by c.25bps, while in a surprise twist yields compressed on the Zenith 19s by c.127bps.

 

 Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.

 

Related News

1.       Treasury Bill Auction Schedule For November 28th 2018

2.       Elevated Liquidity Levels Pressure Rates Lower as PMA Holds on Wednesday

3.       Money Market Rate Decreased Marginally as Overnight Rate Fell to 6.58%

4.       FSDH Research Spots Investment Opportunities in FGN Savings Bonds for Low-Income Earners

5.       Crude Oil prices hit 1-year lows, investor sell-offs hit Eurobonds

6.       Stanbic IBTC - Offer For Subscription Of N30b Series 1 Senior Unsecured Fixed Rate Notes

7.       Monetary Policy Remains Unchanged With Minimal Volatility Expected For The Fixed Income Market

8.      Summary of November 2018 FGN Bond Auction Results

 

READ MORE:
Related News
SCROLL TO TOP