Extremely Bullish bond Auction to take yields to Sub-13% Levels

Proshare

Wednesday, 13 December, 2017/6.00pm/Zedcrest Capital 

KEY INDICATORS

Inflation

15.91%

Declined by 0.07% in October from 15.98% in September 2017

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting of November 2017

External Reserves

$36.43billion

Accreted 1.94% as at 11th December from $36.01 as at 8th December 2017

Brent Crude

$63.53pb

Fell by 2.04% from $64.85pb on 12th December 2017


Bonds
The bond market opened today on a strong note with significant buys on the 2027 and 2037 bonds pushing yields on the bonds as low as 13.53% (114.25) and 13.46% (119.00) respectively. We however witnessed a sharp decline on the 2027s bonds to 13.40% (115.00) towards the close of market as news of significant over subscription at the bond auction filtered in.  Results from the bond auction showed that the DMO sold only N24.77bn and N52.81bn of the 2021 and 2027 bonds despite the signification oversubscription of N89.95bn and N190bn respectively. Rates consequently cleared at 13.19% and 13.21% on the 2021 and 2027 bonds. We expect rates to trade down to sub-13% levels tomorrow as some market players would be looking to cover their lost auction bids. 

Table 1: Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

13.47

13.40

(0.14)

15.54 13-Feb-20

13.61

13.54

(0.03)

14.50 15-Jul-21

13.76

13.69

(0.22)

16.39 27-Jan-22

13.72

13.65

(0.05)

14.20 14-Mar-24

13.61

13.54

(0.37)

12.50 22-Jan-26

13.87

13.80

(0.13)

16.29 17-Mar-27

13.64

13.57

(0.28)

12.15 18-Jul-34

13.68

13.61

(0.19)

12.40 18-Mar-36

13.62

13.55

(0.31)

16.25 18-Apr-37

13.59

13.52

(0.15)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Zedcrest Dealing Desk

 

Table 2: Bond Auction Result

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N’bn) 

FGN Jul-2021

 13.19

50.00 

 89.95

24.77 

FGN Mar-2027

 13.21

50.00

 190.14

52.81

Source: Zedcrest Dealing Desk 

Treasury Bills
The T-bills market traded on a relatively quiet note in today’s session, as market activity remained focused on the bond auction. Yields consequently traded on a relatively flat note, but with slight profit taking observed on some maturities. We expect the market to trade on significantly bullish note tomorrow, due to expected inflow of N270bn in OMO and Stab sec maturities. We might as well see rates trend back to single digit levels tomorrow, in the absence of any interventions by the CBN.

 

Table 3: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

4-Jan-18

12.00

11.75

0.00

1-Feb-18

12.70

12.45

0.00

1-Mar-18

12.00

11.75

0.00

5-Apr-18

11.25

11.00

0.00

3-May-18

12.00

11.75

0.00

14-Jun-18

12.80

12.55

0.00

5-Jul-18

11.50

11.25

0.00

2-Aug-18

13.00

12.75

0.00

20-Sep-18

12.50

12.25

0.00

4-Oct-18

12.30

12.05

0.00

1-Nov-18

12.45

12.20

0.00

Source: Zedcrest Dealing Desk 

Money Market
The OBB and OVN rates remained stable to close today at 2.50% and 3.00%, as market remains in a very robust liquidity position, coupled with anticipated inflows from maturing OMO and Stab Sec bills. We consequently expect rates to trend downwards to around 1% levels tomorrow, with system liquidity estimated to hit c.N700bn, barring any significant interventions by the CBN. 

Table 4: Money Market Rates

 Description

Current (%)

Previous (%)

Open Buy Back (OBB)

2.50

2.33

Overnight (O/N)

3.00

2.92

Source: FMDQ, Zedcrest Research 

FX Market
The CBN Official spot rate remained stable at its previous day rate of N306.30/$. Rates at the Investors and exporters FX window depreciated slightly by 4k to close at N360.41/$. Rates at the parallel market also depreciated further by 50k to N362.00/$. 

Table 5: FX Rates

 Description

Current (N/$)

Previous (N/$)

CBN Spot

306.30

306.30

CBN SMIS

330.00

330.00

I&E FX Window

360.41

360.37

Parallel Market

362.00

361.50

Source: CBN, FMDQ, REXEL BDC 

For more details email 
research@zedcrestcapital.com or call the dealing desk via 01-6311667  

Related News
1.       External Debt Ratios to Savour
2.      Bond market closes positive as CBN maintains cut in OMO rates
3.      Ahead of Next T-bills Auction Scheduled for 29th November, 2017
4.      CBN Signals Market with Another Cut In Omo Rate
5.      Summary of FGN Bond Auction Results for November 2017
6.      Bond Auction Clears 20bps Lower as CBN Cuts OMO Rate
7.      Still a Good Story for the Domestic Debt Stock

READ MORE:
Related News
SCROLL TO TOP