DMO to offer N70bn FGN Bonds tomorrow as N100bn FGN Sukkuk Bond Offer Closes

Proshare

Tuesday, December 18, 2018/ 05:34PM / Zedcrest Capital

*** FG, World Bank PSRP Loan Negotiation Ongoing *** - Fashola

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at December 14, 2018. A c.2bps increase from 11.26% recorded in October 2018

MPR

14.00%

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

External Reserves

$43.04bn

As at December 17, 2018. A c.0.28% increase from $42.92bn on December 14, 2018

Brent Crude

$58.86pb

As at December 18, 2018. A c.2.95% decrease from $60.65pb on December 17, 2018

 

Bonds

The FGN Bond market remained relatively flat, except for slight sell on the 2027 bond, which was the most actively traded on the day, with yields marginally higher by c.6bps on the ticker. On the average, yields were however unchanged on the day.

 

With the closure of the FGN Sukkuk bond offer today, the DMO will auction N20bn, N15bn and N35bn of the 2023, 2025 and 2028 FGN bonds tomorrow. We expect subscription levels at the auction to remain low given the recent lull in demand for bonds in recent sessions. Yields are consequently expected to clear marginally higher from their previous levels, whilst also noting that the DMO is not under significant funding pressure and would be willing to manage rates at the auction.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.28

14.90

0.00

14.50 15-Jul-21

15.78

15.46

0.00

16.39 27-Jan-22

15.12

14.88

0.00

14.20 14-Mar-24

15.26

15.10

0.00

12.50 22-Jan-26

15.78

15.65

(0.04)

16.29 17-Mar-27

15.76

15.72

0.06

13.98 23-Feb-28

15.86

15.75

0.02

12.15 18-Jul-34

15.72

15.59

0.00

12.40 18-Mar-36

15.68

15.57

0.00

16.2499 18-Apr-37

15.56

15.45

(0.03)

Source: Zedcrest Dealing Desk


FGN Bond Auction Expectations

Tenor

Offer (N'bn)

Expected Stop Rate (%)

Previous Stop Rate (%)

Apr-2023

20.00

15.20 - 15.35

15.20

Mar-2025

15.00

15.50 - 15.70

15.50

Feb-2028

35.00

15.75 - 15.90

15.83

Source: Zedcrest Research

 

Treasury Bills

The T-bills market returned bearish in today’s session, as the CBN maintained its OMO interventions in the market with total sale of c.N25bn of the N150bn offered. Yields consequently trended higher by c.5bps, as selloffs on the short end of the curve, outpaced slight demand around some mid tenors.

 

We expect the market to remain slightly bearish as the CBN maintains pressure on system liquidity via its continued OMO auctions.

 


Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Jan-19

15.25

14.80

0.25

14-Feb-19

14.50

14.00

0.00

14-Mar-19

14.00

13.70

0.00

4-Apr-19

14.00

12.85

0.00

2-May-19

13.25

13.00

0.00

13-Jun-19

13.55

13.30

(0.10)

18-Jul-19

14.00

12.75

0.00

1-Aug-19

14.25

14.00

(0.65)

12-Sep-19

15.00

14.75

(0.10)

3-Oct-19

15.05

14.85

(0.05)

14-Nov-19

14.80

14.50

(0.15)

5-Dec-19

15.00

14.90

(0.05)

Source: Zedcrest Dealing Desk

 

Money Market

Rates in the money market moderated by c.20pct, with the OBB and OVN rates closing at 19.33% and 21.95%, as system liquidity opened the day at c.N43bn positive, whilst market players were able to access the CBN’s SLF window to fund their obligations. With the OMO sale of c.N25bn today, system liquidity is estimated at c.N18bn positive as at COB today.

We expect rates to remain elevated tomorrow, with the CBN expected to conduct another round of OMO interventions due to the c.N472bn in OMO maturities expected on Thursday. 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

19.33

36.67

Overnight (O/N)

21.95

38.58

Source: FMDQ, Zedcrest Research 

 

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (spot) and N359.24/$ (SMIS), while the NAFEX rate in the I&E window appreciated further by c.0.01% to N364.96/$ from N365.18/$ previously. Meanwhile, at the parallel market, the cash rate remained unchanged at N365.00/$ while the transfer rate fell by c.0.27% to N368.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

359.24

359.24

I&E FX Window

364.96

365.18

Cash Market

365.00

365.00

Transfer Market

368.00

367.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns remained slightly bearish following slight sell mostly on the longer end of the curve (47s & 49s) which were higher by c.5bps on the day.

 

In the NGERIA Corps, yields on the DIAMBK 19s rallied c.120bps lower, whilst we witnessed renewed interests on the Access 21s, FBNNL 21s and Zenith 22s.

 

Proshare Nigeria Pvt. Ltd.

 

 Proshare Nigeria Pvt. Ltd.


 

Related News

 

1.       Diamond Bank Eurobond Rallies 800bps Following Merger Announcement

2.      Average Yields on Long Term Bills Remain at Over 17.0% on Aggressive OMO Mop Ups

3.      Average Market Rate Rose By 0.69% To Settle At 25.89% As CBN Continued Its Liquidity Mop Up

4.      T-Bills Market Ends Bearish as CBN Conducts Special OMO Auction

5.      Funding Rates Moderate, as Market Players Undersubscribe CBN OMO

6.      Bond Yields Pare Losses amid Renewed Local Demand

7.      Invest in FGN Monthly Bond Auction – December 2018

8.     System Liquidity Falls To Negative Territory Amid Continued OMO Auctions

9.      Money Market Rates hit Five Month High as CBN Maintains OMO Interventions

10.  Sukuk Offer Opens at 15.743%; Average T-Bills Rate Advanced 73bps to 14.4% Sustaining Bearish Run

11.   Average Money Market Rate Rose to 8.24% to Settle at 25.21%

 

Proshare Nigeria Pvt. Ltd.

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