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Expected Downtrend in Inflation to Moderate Pressure on Yields

Proshare

Tuesday, June 12, 2018 09:00AM / Zedcrest Capital

***Fuel Price Rises to N205, Under Recovery Hits N60/Litre***
 

KEY INDICATORS

Inflation

12.48%

Declined by 0.86% in April from 13.34% in March 2018

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting 0n 4 April 2018

External Reserves

$47.42billion

Fell by 0.02% as at 7 June from $47.43bn as at 6 June 2018

Brent Crude

$75.93pb

Fell by 1.07% from $76.75pb on 8 June 2018

 

 

Bonds

The Bond market opened the week on a relatively quiet note, with slight pull back in yields (-9bps) witnessed, as traders improved their bids across some maturities following slight demand on the 2019 and 2024 bonds especially. We expect yields to remain relatively stable at these levels, as market players largely expect that a continued slowdown in the May inflation data to be released Wednesday will moderate negative offshore sentiments from an expected hike in the US FED Funds rate by the FOMC same day.

 

FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

11.54

11.04

(0.52)

15.54 13-Feb-20

12.90

12.47

0.13

14.50 15-Jul-21

13.45

13.31

(0.08)

16.39 27-Jan-22

13.47

12.87

(0.11)

14.20 14-Mar-24

13.28

13.18

(0.14)

12.50 22-Jan-26

13.62

13.53

(0.04)

16.29 17-Mar-27

13.48

13.32

0.00

12.15 18-Jul-34

13.68

13.63

0.00

12.40 18-Mar-36

13.59

13.48

(0.06)

16.25 18-Apr-37

13.62

13.47

(0.06)

























Source: Zedcrest Dealing Desk

 

 Treasury Bills

The T-bills market remained relatively quiet, with no significant volumes traded, as market players anticipate increased supply of T-bills via OMO and NTB auctions, (Wednesday/Thursday). Yields consequently compressed marginally by c.7bps to 12.77%. We expect yields to remain relatively stable at these levels, barring a significant decline in the net system liquidity.

 

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Jun-18

13.50

12.00

0.00

5-Jul-18

12.50

11.50

0.00

2-Aug-18

12.00

11.50

0.00

13-Sep-18

12.50

11.50

0.00

4-Oct-18

12.50

11.50

0.00

1-Nov-18

12.25

12.00

0.00

6-Dec-18

12.30

12.05

0.00

3-Jan-19

12.30

11.50

0.15

14-Feb-19

12.50

11.50

0.00

14-Mar-19

12.50

11.00

0.00

4-Apr-19

13.50

12.00

0.00

Source: Zedcrest Dealing Desk

 

 

Money Market

The OBB and OVN rates shot higher by c.7pct to 11.83% and 12.58% respectively. This came on the back of a significant decline in system liquidity by c.N380bn, largely due to outflows for retail FX funding by banks in the previous session. Banks also had to provision for their wholesale FX bids today, consequently exerting some pressure on rates.  We expect rates to trend slightly lower tomorrow, as there are no significant funding pressures expected.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

11.83

4.83

Overnight (O/N)

12.58

5.33

Source: FMDQ, Zedcrest Research

  

 

FX Market

The Interbank rate appreciated by 0.02% to N305.90/$ from its previous rate of N305.95/$. The I&E FX rate also appreciated further by 1bp to N360.87/$. In the parallel market, cash rates depreciated slightly by 20k to N361.20/$, while the transfer market rate remained stable for the fifth consecutive session at N364.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.90

305.95

CBN SMIS

330.00

330.00

I&E FX Window

360.87

360.91

Cash Market

361.20

361.00

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC

 

  

Eurobonds:

The NGERIA Sovereigns continued their bearish run, with yields rising higher by c.6bps on average. This was following continued selloff mostly on the longer end of the curve (27s - 47s) which fell by –0.50pt on average.

 

The NGERIA Corps were also slightly bearish, with investors selling off mostly on the Access 21s and the Zenith and UBANL 22s.  We however witnessed slight gains on the FIDBAN 22s, which recovered slightly (+0.25pt) from the significant selloff witnessed in the previous session. It is however still trading well above the 10% mark at 10.13%.

 

 

 Proshare Nigeria Pvt. Ltd.




Proshare Nigeria Pvt. Ltd. 

 

 

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