Despite Year End Funding Pressures, CBN Maintains OMO and FX Interventions

Proshare

Monday, December 31, 2018/ 04:54PM / Zedcrest Capital

***Nigeria’s Total Public Debt Stock Rises to N22.43Trn in Q3 2018*** - DMO

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

$43.23bn

As at December 27, 2018. A c.0.14% decrease from $43.29bn on December 24, 2018

Brent Crude

$54.15pb

As at December 31, 2018. A c.2.19% increase from $52.99pb on December 28, 2018

 

Bonds

The Bond market traded on a relatively flat note in today’s session, as market players’ closed off their books for the year. Yields were however slightly higher by c.5bps as bids weakened on the short and long end of the curve, consequently overshadowing a slight compression on the mid tenors.

 

We expect a further uptick in yields as trading activities resume in the New Year.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.13

14.14

0.00

14.50 15-Jul-21

15.63

15.28

0.28

16.39 27-Jan-22

15.12

14.45

0.10

14.20 14-Mar-24

14.46

14.25

0.12

12.50 22-Jan-26

15.47

15.08

(0.12)

16.29 17-Mar-27

15.45

15.29

0.00

13.98 23-Feb-28

15.56

15.21

(0.06)

12.15 18-Jul-34

15.50

15.10

0.01

12.40 18-Mar-36

15.60

15.27

0.09

16.2499 18-Apr-37

15.57

15.25

0.08

Source: Zedcrest Dealing Desk 

 

Treasury Bills

The T-bills market was also scantily traded, with yields rising by c.50bps as some market players sold off slightly, in a bid to shore up their year-end cash positions in the wake of the c.N154bn OMO sale by the CBN.

We expect yields to remain elevated in the T-bills space going into the New Year, as the CBN is expected to maintain its current spate of OMO issuances. We however expect slight moderation on the shorter end of the curve, as market players would look to cherry-pick on some attractive maturities in the New Year.

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Jan-19

16.25

12.50

0.50

14-Feb-19

16.50

11.00

1.00

14-Mar-19

15.00

11.00

0.50

4-Apr-19

15.50

13.15

0.00

2-May-19

15.00

12.50

1.40

13-Jun-19

15.00

12.50

0.00

18-Jul-19

15.00

12.50

0.50

1-Aug-19

16.00

14.75

1.00

12-Sep-19

15.05

14.80

0.05

3-Oct-19

15.50

14.20

0.60

14-Nov-19

15.00

14.85

0.05

5-Dec-19

16.25

12.50

0.50

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates in the money market remained slightly pressured, with the OBB and OVN rates inching higher to close at 19.00% and 20.17%. This came on the back of the continued OMO and wholesale FX interventions by the CBN, even as market players sought to bolster their year-end cash positions. We estimate system liquidity to close the year in negative territory of c.N500bn, given the OMO and FX debits by the CBN in the previous and current session.

We expect rates to remain elevated due to the relatively tighter level of system liquidity and with the CBN expected maintain its current spate of OMO issuances in the New Year.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

19.00

17.17

Overnight (O/N)

20.17

18.42

Source: FMDQ, Zedcrest Research

  

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N307.00/$ (spot) and N359.24/$ (SMIS), while the NAFEX rate in the I&E window appreciated by c.0.14% to N364.00/$ from N364.50/$ previously. At the parallel market, the cash rate depreciated slightly by c.0.14% to N360.00/$, while the transfer rate appreciated firmly by c.0.55% to N364.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

307.00

307.00

CBN SMIS

358.31

358.31

I&E FX Window

364.00

364.50

Cash Market

360.00

359.50

Transfer Market

364.00

366.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns remained relatively stable, with only slight sell witnessed on some short tenured maturities, which pressured the curve higher by c.2bps on the day.

 

In the NGERIA Corps, investors were bearish on the Zenith and Diambk 19s, while we witnessed renewed buying interests on the FBNNL 21s.



Proshare Nigeria Pvt. Ltd.



 Proshare Nigeria Pvt. Ltd.


 

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