Fixed Income Market Maintains Bearish Posture As The CBN Carries On With OMO Auctions

Proshare

Thursday, December 06, 2018/ 06:34AM / Zedcrest Capital

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.26%

As at November 21, 2018. A c.2bps down from 11.28% recorded in September 2018

MPR

14.00%

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

External Reserves

$42.41bn

As at December 4, 2018. A c.0.19% increase from $42.33bn on December 3, 2018

Brent Crude

$62.91pb

As at December 5, 2018. A c.1.35% increase from $62.07pb on December 4, 2018

 

Bonds

The FGN bond market was very lethargic today with little volumes going in throughout the trading session. Sell pressures remained on the short-end of the curve, where yields ticked higher by c.29bps and c.13bps on the FGN 2020 & 2021 maturities respectively in reaction to the daily OMO auction. However, before the close of trading, we saw some scanty demand on the FGN 2027 & 2037 maturities. Overall, yields increased by a meagre 0.05bps to end the day.

 

We expect the market to remain order driven, however with a bearish bias as we approach the bond auction.

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.29

14.91

0.29

14.50 15-Jul-21

15.76

15.30

0.13

16.39 27-Jan-22

15.03

14.85

0.10

14.20 14-Mar-24

15.32

15.07

0.02

12.50 22-Jan-26

15.84

15.72

0.00

16.29 17-Mar-27

15.80

15.72

(0.04)

13.98 23-Feb-28

16.03

15.88

0.03

12.15 18-Jul-34

15.80

15.59

0.00

12.40 18-Mar-36

15.81

15.70

0.02

16.2499 18-Apr-37

15.75

15.66

0.00

Source: Zedcrest Dealing Desk

 

Treasury Bills

The T-bills market traded firmly bearish today, as market participants factored in renewed T-bills supply from the OMO auction. We saw more intense sell off on the short end of the curve while the mid to long end traded flattish. Consequently, Yields expanded by c.28bps on the average across quoted benchmark T-bills securities.

 

The CBN sold a total of c.N92.08bn at today’s OMO auction across three maturities on offer. The stop rates on the short (92-days), mid- (183-days) and long-end (351-days) maturities were maintained at 11.65%, 13.50% and 15.00% respectively.

 

The CBN is expected to float another OMO auction tomorrow to match maturities of c.N684bn. We maintain a cautious outlook on T-bills in light of the sustained OMO auctions and a possible hike in OMO rate in the short term.


OMO Auction Result

Tenor

Rate (%)

Offer (₦’bn)

Sub (₦'bn)

Sale (₦'bn)

92-days

11.65

30.00

0.04

0.04

183-days

13.50

50.00

1.19

1.19

351-days

15.00

100.00

90.89

90.89

 

Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Jan-19

14.50

13.00

0.50

14-Feb-19

14.50

13.95

0.50

14-Mar-19

14.25

13.00

0.95

4-Apr-19

14.00

12.85

0.00

2-May-19

13.20

12.75

0.00

18-Jul-19

13.80

13.70

0.00

1-Aug-19

14.60

13.70

0.50

12-Sep-19

15.00

14.45

0.00

3-Oct-19

15.10

14.50

0.20

14-Nov-19

15.10

14.50

0.10

Source: Zedcrest Dealing Desk

 

Money Market

Money Market rates trended higher today as the CBN showed no signs of slowing down on its daily OMO T-bills issuance. Open Buy-Back (OBB) and overnight (O/N) closed higher at 12.00% (from 8.67%) and 13.08% (from 9.50%) respectively due to the debit of OMO Tbills sales of (c.N92.08bn). System liquidity is consequently estimated at c.N215.57bn as at close of business today.

 

We expect funding rates to drop tomorrow as inflows via OMO maturities (c.N684bn) hit the system. The CBN is expected to float an OMO auction in a bid to continuously mop up excess liquidity from the banking system and also deter speculative activities on the naira.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

12.00

8.67

Overnight (O/N)

13.08

9.50

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank market, the Naira/USD rate remained unchanged to close at N306.85/$ (spot) and appreciated by c.0.18% to close at N359.81/$ (SMIS). Value traded at the I&E FX window picked up today with a total trade turnover of $410.34m traded in 311 deals, with rates ranging between N350.00/$ - N365.90/$. The NAFEX closing rate depreciated by c.0.01% to close at N364.65/$ from N364.63/$ previously.

 

The naira strengthened today off the back of renewed supply at the parallel markets, with both cash and transfer rates appreciating by c. 0.68% to close at N365.00/$ & N370.00/$ respectively.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.85

306.85

CBN SMIS

359.16

359.81

I&E FX Window

364.65

364.63

Cash Market

365.00

368.00

Transfer Market

370.00

372.00

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

A quiet session for Eurobonds in general, as U.S. traders marked a day of mourning for the state funeral of former president George H.W. Bush.

 

The NGERIA Sovereign Eurobonds weakened further as a new deal to cut supply of crude oil by the OPEC looks less likely. Yields ticked higher by c.7bps on the average across the curve, for a second consecutive trading session.

 

The NGERIA Corps had a very quiet session, with little or no volume traded on the day and no price movement across the tracked tickers.

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


 

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2.       Bullish Run Reversed as Yield on Long Dated Bills Hit 17.0%

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4.       Access Bank Plc Series XX N30billion Commercial Paper Closes Tomorrow

5.       December 2018 FGN Savings Bond Offer for Subscription

6.       CBN Sends Hawkish Signals to The Market, Hikes OMO Rate to YTD Highs

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