DMO Manages Auction Rates, With Slight Uptick on the 10-yr

Proshare

Wednesday, September 24, 2018/ 08.31PM / Zedcrest Capital

***FG proposes N8.73trillion for 2019 budget***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at October16, 2018,5bps up from 11.23% recorded in August 2018.

MPR

14.00%

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

External Reserves

$42.46bn

As atOctober23, 2018. A c.0.16% decrease from $42.53bnon October22, 2018

Brent Crude

$76.11pb

As at October 24, 2018. A c.0.90% decreasefrom$76.80pbon October 23, 2018

 

 

Bonds

The bond market traded on a relatively flat note today, except for some speculative sales on the 2027 and 2028 bond towards the end of trading. Yields consequently ticked marginally higher by c.1bp on average.

 

The Bond Auction by the DMO was moderately subscribed, with total bid size of c.N143bn received of the N115bn offered. The DMO however raised only a total of c.N88bn which was c.N8bn less than the c.N96bn sold at the previous auction. The DMO maintained rates on the 2023 and 2025 bonds at 15.00% and 15.15% respectively, while the clearing rate on the 2028 bond ticked higher by c.7bps to 15.32% from its level (15.249%) at the previous auction.

 

We expect slight demand on the 2028 bond tomorrow, while other bonds are also expected to compress slightly, in tune with the relatively moderate level of demand at today’s auction.

 


FGN Bond Auction Result

Maturity

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N’bn)

Apr-23

15.00

35.00

16.50

12.65

Mar-25

15.15

35.00

24.90

20.14

Feb-28

15.32

45.00

102.08

55.29

Source: DMO


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.18

13.67

(0.01)

14.50 15-Jul-21

15.00

14.70

(0.02)

16.39 27-Jan-22

14.71

14.19

(0.02)

14.20 14-Mar-24

15.13

14.96

0.04

12.50 22-Jan-26

15.07

14.98

0.04

16.29 17-Mar-27

15.16

15.05

0.00

13.98 23-Feb-28

15.34

15.26

0.01

12.15 18-Jul-34

15.33

15.25

0.00

12.40 18-Mar-36

15.30

15.13

0.01

16.2499 18-Apr-37

15.17

15.08

(0.01)

Source: Zedcrest Dealing Desk


Treasury Bills

The T-bills market remained slightly bearish, with yields ticking higher by c.13bps on average. This came as market players remained under pressure from the relatively tight level of sytem liquidity, whilst expectation for a further OMO auction by the CBN tomorrow forced slight selloff on the longer end of the curve.

 

We expect yields to remain elevated due to expectations for the OMO auction tomorrow, and for a further tightening of system liqudity via a retail fx auction and bond auction settlement on Friday.

 

 


Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

1-Nov-18

13.25

12.50

0.20

6-Dec-18

13.50

12.60

0.50

3-Jan-19

13.00

12.65

(0.05)

14-Feb-19

13.00

12.80

(0.05)

14-Mar-19

13.00

12.75

0.05

4-Apr-19

12.70

12.45

0.15

18-Jul-19

13.00

12.55

0.05

1-Aug-19

13.70

13.15

0.25

12-Sep-19

13.95

13.90

0.00

3-Oct-19

13.95

13.85

0.10

Source: Zedcrest Dealing Desk

  

 

Money Market

In line with our expectations, the OBB and OVN ratesremained elevated, closing today at 16.67% and 17.21%, as system liquidity remained relatively depressed at c.N62bn positive.

 

Despite the c.N284bn expected inflows from OMO maturities tomorrow, rates are expected to remain elevated, with the CBN expected to keep system liquidity tight via a further OMO Sale.We however note that the CBN is equally likely to refrain from conducting an OMO auction due to the huge amount of system outflows expected for a Retail SMIS and Bond Auction settlement on Friday.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

16.67

15.00

Overnight (O/N)

17.21

15.79

Source: FMDQ, Zedcrest Research 

 

 

FX Market

At the Interbank, the Naira/USD rate remained stable at N306.55/$ (spot) and N362.52/$ (SMIS).At the I&E FX window a total of $339.03mn was traded in 482 deals, with rates ranging between N350.00/$ - N365.00/$. The NAFEX closing rate depreciatedslightlyby c.0.02% toN364.01/$ from N363.94/$ previously.

                                                                     

At the parallel market, the cash rate appreciated by 30k to N360.70/$, while the transfer rate remained unchanged at N364.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.55

306.55

CBN SMIS

362.52

362.52

I&E FX Window

364.01

363.94

Cash Market

360.70

361.00

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC

 

 

 

Eurobonds

The NGERIA Sovereigns flattened out in today’s session, with yields closing relatively flat on the day, except for slight sell seen on the Nov 2027 bond (+5bps).

               

The NGERIA Corps were mostly flat, except for slight sell on the DIAMBK 19s and UBANL 22s.

 

 

 Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.



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