DMO Gets Robust Auction Demand, Raises More than the N90bn Offered at 1.64X Bid to Cover

Proshare

Thursday, September 27, 2018 / 07:04 PM /  Zedcrest Capital


***USFed raises interest rates, gives bullish outlook for economy***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at September14, 2018,9bps up from 11.14% recorded in July 2018.

MPR

14.00%

Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting

External Reserves

$44.52bn

As atSeptember 25, 2018. A c.0.20% decrease from $44.61bnon Sept. 24, 2018

Brent Crude

$80.66pb

As at September26, 2018. A c.0.88% decreasefrom$81.38pbon Sept. 25, 2018

 

 

Bonds

The Bond market remained relatively flat, with yields compressing marginally by c.2bps, following slight buys on the 21s, 27s and 34s. In line with our expectations, demand at the FGN Bond auction was moderately robust with average bid to cover at 1.64x. We witnessed significant oversubscription of c.250% on the 2028 bond which recorded the most sale of N71.88bn of the N50bn offered.

 

The DMO consequently raised a total of N96.74bn at marginal rates of 15.00%, 15.10% and 15.2459% on 2023, 2025 and 2028 respectively. The clearing rates were c.57bps above their previous auction levels in tune with the recent developments in the market.

 

We expect the market to remain range bound in the near term, to be largely supported by interests from Local clients and the recent easing in EM pressures. Our expectation however remains for a further uptick in yields in the months ahead, to be driven by expected uptick in inflation and increased fiscal injections, combined with risk off sentiments in view of the forthcoming General elections. 


FGN Bond Auction Result

Maturity

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N’bn)

Apr-23

15.00

25.00

20.68

17.48

Mar-25

15.15

25.00

12.48

7.38

Feb-28

15.25

40.00

125.35

71.88

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.17

13.33

0.03

14.50 15-Jul-21

15.06

14.88

(0.11)

16.39 27-Jan-22

14.65

14.42

(0.07)

14.20 14-Mar-24

15.02

14.85

0.00

12.50 22-Jan-26

15.19

15.04

(0.04)

16.29 17-Mar-27

15.21

15.15

(0.02)

13.98 23-Feb-28

15.26

15.19

0.03

12.15 18-Jul-34

15.41

15.29

(0.02)

12.40 18-Mar-36

15.42

15.33

(0.03)

16.2499 18-Apr-37

15.41

15.30

(0.01)

Source: Zedcrest Dealing Desk 

 

Treasury Bills

The T-bills market traded with mixed sentiments in today’s session, with further selloff witnessed on the shorter end of the curve (Oct - Dec), while we witnessed slight interests around the mid tenors (Jan –Mar). Yields consequently stayed relatively flat at c.12.97% on average.

 

We expect yields to decline slightly tomorrow, due to anticipated inflows from OMO maturities. We however expect the CBN to intervene with an OMO auction, which should expectedly stifle buying interests in the market, especially if a long tenor bill >300 days is offered by the CBN.

 

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Oct-18

13.00

11.05

1.00

1-Nov-18

14.00

12.00

1.00

6-Dec-18

12.75

12.50

(0.25)

3-Jan-19

12.20

11.90

(0.55)

14-Feb-19

12.75

12.60

(0.25)

14-Mar-19

12.20

12.05

(0.65)

4-Apr-19

12.45

12.30

(0.55)

18-Jul-19

13.20

12.50

0.20

1-Aug-19

13.00

12.75

0.00

Source: Zedcrest Dealing Desk 

 

 

Money Market

The OBB and OVN rates remained elevated, closing today slightly lower at 16.67% and 17.92% respectively, as system liquidity is estimated to remain much unchanged from its previous levels (c.N120bn).

 

We expect rates to trend lower tomorrow, due to anticipated inflows from OMO maturities and Retail FX refunds. Market players would however remain wary of expected funding for CBN’s Retail FX auction on Friday.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

16.67

18.00

Overnight (O/N)

17.92

19.42

Source: FMDQ, Zedcrest Research


FX Market

At the Interbank, the Naira/USD rate remained stable at N306.35/$ (spot), while the SMIS rate depreciated by c.0.11% to N361.34/$ from N360.94/$ previously.At the I&E FX window a total of $164.47mn was traded in 358 deals, with rates ranging between N330.00/$ - N365.00/$. The NAFEX closing rate depreciated by c.0.08% to N364.00/$ from N363.72/$ previously.

 

At the parallel market, the cash rates depreciated by 10k to N359.70/$, while the transfer rate remained unchanged at N362.00/$.


FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.35

306.35

CBN SMIS

361.34

360.94

I&E FX Window

364.00

363.72

Cash Market

359.70

359.60

Transfer Market

362.00

362.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereignsmaintained its bullish run in today’s session, with yields compressing by c.5bps on average, amid continued interests from Investors within the SSAs (KENINTS especially). We witnessed the most interest today on the 2038s and 2047s, which gained c.0.70pp on the day.

 

The NGERIA Corpsremained slightly bullish, with strong interests seen on the Access 21s Snr, and slight interests on the FIDBAN 22s.

 

 

 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

Related News

1.       Bond Yields Compress Further on Renewed Local Demand

2.      Resurgent Interests in EM Bolsters Nigerian Eurobonds to 6-Week High

3.      Market players Oversubscribe 1yr PMA Bill by c.250%

4.      Bond Yields Weaken Following Renewed Local Supply on the Long End

5.      Average T-Bills Rate Rose 184bps WoW Amidst Buoyant System Liquidity

6.      Bond Yields Moderate Further Amid Tighter Supply

7.      Average T-bills Yield Rose Significantly by 208bps to Close the Week at 14.43%

8.     Markets Take a Breather as CBN Pauses on OMO

9.      Market Players Selloff Bills above 14% as CBN extends OMO offer to the 1-year

10.  Yield Curve Nears Inversion as DMO Clears 1-Year Bill at 15.60% eff. Yield

11.   Market Players Risk off T-bills, as CBN Elongates OMO Tenor above the 300day Mark

12.  Ahead of Next T-bills Auction Scheduled for 12th Sept, 2018

13.  Market Players Demand Higher Rates for OMO, as PMA Approaches

 

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