EMs see respite as Turkey’s Lira recovers, local markets still on the decline

Proshare

Tuesday, August 14, 2018 /09:00PM / Zedcrest Capital

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at July 23, 2018, 38bps down from 11.61% recorded in May 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$46.55bn

As at August 13, 2018. A c.0.23% decrease from $46.66bn as at August 10, 2018.

Brent Crude

$72.83pb

As at August 14, 2018. A c.2.16% increase from $71.22pb as at August 13, 2018

 

 

Bonds

The FGN bond market traded with mixed sentiments today with a relief rally at the start of market after yesterday’s aggressive sell-off. However, this mood was short-lived as the market turned very bearish with yields reaching another YTD record high closing at 14.63% on the average, c.6bps higher that the previous day’s close. We expect the bearish trend in the market to persist, however at a slow pace as traders stay on the sidelines awaiting the results of the FGN bond auction scheduled to hold tomorrow.

 

The DMO is expected to raise an aggregate of N90billion at tomorrow’s FGN Auction with the 5-, 7- & 10-year bonds on offer. Our forecast for stop rates are 14.00-14.30% (5-year re-opening), 14.40-14.70% (7-year re-opening) & 14.65-14.95% (10-year re-opening).

 

FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.01

13.37

0.04

14.50 15-Jul-21

14.53

14.05

0.13

16.39 27-Jan-22

14.30

14.08

0.03

14.20 14-Mar-24

14.70

14.31

0.00

12.50 22-Jan-26

14.77

14.66

0.09

16.29 17-Mar-27

14.77

14.63

0.07

13.98 23-Feb-28

14.87

14.67

0.16

12.15 18-Jul-34

14.73

14.45

0.08

12.40 18-Mar-36

14.74

14.64

(0.02)

16.2499 18-Apr-37

14.81

14.41

0.00

Source: Zedcrest Dealing Desk

 

Treasury Bills

T-bills market recovered from the previous day sell-off as bargain hunting for superior yields compressed the NTbills yield curve by c.8bps.  We expect activities in the T-bills market to be muted tomorrow as market participants focus on the upcoming NTB auction.

The DMO is expected to conduct a T-bills Primary Market Auction tomorrow, with N3.38bn, N10.00bn and N20.00bn of the 91-, 182- and 364-day bills respectively on offer at the auction.

We expect stop rates to clear between 10.50-11%, 10.90-11.20% and 11.50-12.00% for the 91-, 182- and 364-day bills respectively.

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

13-Sep-18

11.00

10.25

(0.05)

4-Oct-18

11.00

10.00

0.45

1-Nov-18

11.65

11.51

0.20

6-Dec-18

12.20

12.05

0.05

3-Jan-19

12.35

12.17

0.10

14-Feb-19

12.30

12.17

0.15

14-Mar-19

12.15

11.95

0.00

4-Apr-19

12.15

11.25

(0.05)

18-Jul-19

11.60

11.15

(0.10)

Source: Zedcrest Dealing Desk

 

 

Money Market

The OBB and OVN rates trended lower today to close at 10.38% and 11.17% respectively in the absence of liquidity tightening activities by the CBN. We expect funding rates to remain stable tomorrow as we do not anticipate any significant pressure on system liquidity.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

10.38

11.45

Overnight (O/N)

11.17

12.42

Source: FMDQ, Zedcrest Research

 

FX Market

The Naira remained stable at both the interbank and I&E FX window, closing the day at N306.05/$ and N362.30/$ respectively.  At the parallel market, the cash rates appreciated by N0.20 to N359.20/$, while the transfer rates traded flat at to N362.00/$.

 

Oil prices increased by 2.26%, to close at $72.83pb as the Kingdom of Saudi Arabia reported cuts in oil production to avoid oversupply to prevent another oil glut. The Kingdom’s self-reported figures pegged the drop to 200,000 barrels per day for the month of July.

The CBN’s External reserves continued its daily decline, dropping by c.0.23% to close at $46.55bn as at 13-Aug, 2018.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.05

306.05

CBN SMIS

352.00

352.00

I&E FX Window

362.30

362.20

Cash Market

359.20

359.40

Transfer Market

362.00

362.00

Source: CBN, FMDQ, REXEL BDC

  

 

Eurobonds

We witnessed renewed demand in the NGERIA Sovereigns space as the panic sell-offs across emerging markets waned in today’s trading session. Consequently, yields declined by an average of 14bps across the traded tickers. Demand was most prominent at the long end of the Sovereign curve, with yields on the 2038s & 2047s compressing by 21bps and 23bps respectively.

 

Similarly, bargain hunters traded the NGERIA Corps aggressively with yields trending lower by c.10bps on the average across the curve. The GRTBNL 18s reversed previous losses and posted more gains, as yields compressed by c.54bps DoD.

 

 Proshare Nigeria Pvt. Ltd.

 

 Proshare Nigeria Pvt. Ltd.

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