Fixed Income Market Monitor - Average T-Bills Yield Fell by 5bps to Close The Week at 12.15%

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Monday, August 27, 2018 01:45PM /Anchoria AM Research

 

Money Market 

The money market rate decreased marginally last week as the Overnight rate (OVN) and Open Buy Back rate (OBB) fell to 7.92% and 6.75% respectively. Consequently, the average money market rate decreased by 0.50% to settle at 7.34% despite reduction in the system liquidity to close at cN361bn due to outflow from Wholesale, Invisible & SME FX auction of $210mn, OMO T-bill sales of cN97.9bn, and CRR of cN22bn despite an inflow from OMO T-bills maturities of cN364.33bn during the week. 

We expect rates to inch up on Monday as banks are expected to fund for another round of FX sales in the Wholesale, Invisibles and SME Market, however with the inflow from FAAC this week, OMO T-bills and T-bills maturities we expect the rate to decline.

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Forex: USD/NGN 

The CBN Official rate remained unchanged during the week to close at N306.10/$, while the rate in the Investors and Exporters’ FX Window fell by 0.04% to close at N362.35/$. Naira at the parallel market remained unchanged to close at N360.00/$ (using the Everdon BDC Rate). 

We expect rates in the parallel market to remain constant as the apex bank continues to supply FX into the market coupled with its frequent Wholesale and Retail SMIS programme.

17/08/2018

24/08/2018

Change

CBN Official Rate

306.10

306.10

+0.00%

I&E FX Window

362.50

362.35

-0.04%

Everdon Rate

360.00

360.00

+0.00%

Source: Anchoria AM Research, FMDQ OTC

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Commodities

The Brent Crude oil and WTI crude oil rose by 5.55% and 4.26% to close at $75.82 per barrel and $68.72 per barrel respectively due to the decline in US Crude Oil inventories. 

According to the Energy Information Administration report, the domestic crude supplies fell by 5.8 million barrels for the week ended Aug. 17 which is far above S&P Global Platts forecast of 3.4 million barrels decline. 

Also, Saudi Arabia has formally put the initial public offering of its giant oil company on hold, while Aramco focuses on buying a strategic stake in local petrochemical group Sabic for as much as US$70 billion.

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Fixed Income

Bond

The Bond market traded on a flat note last week with mixed reactions in different tenors. Sell offs was more pronounced on the APR 2037 bonds (+73bps) while demand was more pronounced on FEB 2020 Bonds (-23bps). The 2027 and 2028 bonds were the most traded bonds during the week with N20.81bn and N23.31bn value traded respectively. This can be attributed to the following a) increase in local demand on 2027 and 2028 bonds; b) increased investors’ sentiment across Emerging Markets.

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 Proshare Nigeria Pvt. Ltd.

Treasury Bills

Due to relatively buoyant system liquidity during the week, the treasury bills market traded on a bullish note. Consequently, the average yield fell by 5bps to close the week at 12.15%. Market activities was relatively quiet as value of transactions fell to N413.61bn from N972.99bn in the previous week due to the 2-days Salah holiday observed during the week. 

During the week, CBN floated OMO on 91 days and 203 days T-Bills maturities at 11.05% and 12.15% with a total subscription of N11.26bn and N86.64bn respectively. This represents a subscription rate of 24.48%. 

The Central Bank of Nigeria is expected to conduct its T-Bills Primary Market Auction on Wednesday, 29 August 2018. The CBN is expected to rollover the same amount of T-bills maturing.

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5.      Bearish Trend Sustained as Average Rate Advanced 19bps to 11.7%

6.      Investment Opportunities in Commercial Papers

7.      Fixed Income Market Monitor – Overnight Rate Fell to 833%

8.     Bond yields Test 15% levels amid continued Offshore Selloff

9.      Market Sentiment remains weak as EM pressures Persist

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