Funding Rates Moderate, as Market Players Undersubscribe CBN OMO

Proshare

Thursday, December 12, 2018/ 05:54AM / Zedcrest Capital

***Oil slides again over doubts OPEC can avert glut***

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

$42.80bn

As at December 11, 2018. A c.0.12% increase from $42.75bn on December 10, 2018

Brent Crude

$59.71pb

As at December 13, 2018. A c.1.71% decrease from $60.75pb on December 12, 2018

 

Bonds

The FGN Bond market traded on a relatively flat note, but with slight interest on the 2028 and 2037 bond compressing yields marginally by c.1bp on average.

 

We expect the market to maintain its current flattish trend in the near term, as local players remain relatively risk off in tune with rising short term rates and political risk sentiments in the horizon.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.28

14.95

0.04

14.50 15-Jul-21

15.75

15.45

0.03

16.39 27-Jan-22

15.12

14.92

(0.01)

14.20 14-Mar-24

15.26

15.19

(0.03)

12.50 22-Jan-26

15.82

15.69

(0.02)

16.29 17-Mar-27

15.75

15.64

0.00

13.98 23-Feb-28

15.91

15.80

(0.02)

12.15 18-Jul-34

15.75

15.61

0.00

12.40 18-Mar-36

15.70

15.64

(0.02)

16.2499 18-Apr-37

15.54

15.51

(0.06)

Source: Zedcrest Dealing Desk

 

Treasury Bills

Yields in the T-bills market ticked slightly higher, as market players shed some holdings of short tenured bills due to the more attractive 364-day tenor on offer by the CBN at the OMO auction floated today. Market players bided for a total of c.N295bn of the N500bn offered, with most bids skewed to the 364-day (c.N258bn), and rates maintained at 11.90%, 13.50% and 15.00% on the 91, 182 and 364-day bills respectively.

 

We expect the CBN to maintain its pace of OMO interventions, whilst also noting the possibility for higher stop rates or direct mop ups (stab) due to continued under subscriptions by market players.

 

Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Jan-19

15.20

14.30

0.20

14-Feb-19

15.00

14.45

0.00

14-Mar-19

14.30

13.70

(0.20)

4-Apr-19

14.35

12.85

0.05

2-May-19

13.75

13.25

0.00

18-Jul-19

13.55

13.25

0.00

1-Aug-19

14.00

12.75

0.00

12-Sep-19

14.95

14.25

(0.05)

3-Oct-19

15.10

14.90

0.00

14-Nov-19

15.10

14.80

0.00

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates in the money market moderated significantly by c.40pct to 16.50% and 17.25%, as system liquidity (which was hitherto in a net negative position of c.N144bn) was significantly bolstered by inflows from OMO and PMA repayments (c.550bn). With total OMO sale of c.N295bn, we estimate system liquidity to be at c.N110bn positive as at COB today.

Rates are expected to close the week slightly higher, with CBN expected to conduct a further OMO auction tomorrow.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

16.50

56.67

Overnight (O/N)

17.25

62.50

Source: FMDQ, Zedcrest Research

 

 

 

FX Market

At the Interbank, the Naira/USD rate remained stable at N306.90/$ (spot) and N359.24/$ (SMIS). At the I&E FX window, the NAFEX closing rate depreciated by c.0.06% to close at N365.00/$ from N364.77/$ previously.

 

At the parallel market, the cash and transfer rate depreciated by 0.06% and 0.55% to N362.20/$ and N368.00/$ respectively.

 

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.90

306.90

CBN SMIS

359.24

359.24

I&E FX Window

365.00

364.77

Cash Market

362.20

362.00

Transfer Market

368.00

366.00

Source: CBN, FMDQ, REXEL BDC


 

Eurobonds

The NGERIA Sovereigns maintained a 3-day rally which has now culminated in a c.25bps gain across the curve. Risk cleared today across most maturities, with market players specifically favouring the new issues.

 

In the NGERIA Corps, investors renewed demand for the DIAMBK 19s and ACCESS 21s Sub, whilst sentiments dampened on the Access 21s Snr and UBANL 22s.

 


Proshare Nigeria Pvt. Ltd.


 

Proshare Nigeria Pvt. Ltd.


 

Related News

1.       Bond Yields Pare Losses amid Renewed Local Demand

2.      Invest in FGN Monthly Bond Auction – December 2018

3.      System Liquidity Falls To Negative Territory Amid Continued OMO Auctions

4.      Money Market Rates hit Five Month High as CBN Maintains OMO Interventions

5.      Sukuk Offer Opens at 15.743%; Average T-Bills Rate Advanced 73bps to 14.4% Sustaining Bearish Run

6.      Average Money Market Rate Rose to 8.24% to Settle at 25.21%

7.      Could The US Market Rally Signal A Coming Recession?

8.      Tight System Liquidity Pushes Funding Rates to a One Month High

9.      The CBN Conducts a Special OMO Auction In Anticipation Of More Fiscal Spending

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

 

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