Funding Rates Spike Following Drain in System Liquidity

Proshare

Saturday, October 06, 2018 / 09: 37AM /  Zedcrest Capital

***Nigeria’s oil, gas export sale rises by 36%***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at September14, 2018,9bps up from 11.14% recorded in July 2018.

MPR

14.00%

Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting

External Reserves

$43.92bn

As atOctober4, 2018. A c.0.11% decrease from $43.97bnon October3, 2018

Brent Crude

$84.67pb

As at October 5, 2018. A c.1.36% decreasefrom$85.84pbon October 4, 2018

 

 

Bonds

The bullish sentiments in the bond market persisted in today’s session, with yields moderating further by c.6bps following some break in support on the 2027 and 2037 bond which traded as low as 14.95% on each. We also witnessed interests on the 2022 bond, whilst there were slight retracements upward on the 2020 bond.

 

As sentiments around an expected Q4 Eurobond Launch ($2.8bn/N850bn) continues to filter into the market, we expect the market to remain slightly bullish in the near term. We are however cautious in anticipation of the Q4 FGN Bond Calendar, which we still expect to be relatively higher, in tune with the deficit levels for the 2018 budget (N1.95trn). 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.77

13.44

0.12

14.50 15-Jul-21

14.74

14.02

(0.14)

16.39 27-Jan-22

14.03

13.60

(0.38)

14.20 14-Mar-24

14.95

14.77

(0.01)

12.50 22-Jan-26

14.80

14.65

0.00

16.29 17-Mar-27

15.06

14.94

(0.03)

13.98 23-Feb-28

15.10

15.03

(0.04)

12.15 18-Jul-34

15.17

15.08

0.00

12.40 18-Mar-36

15.09

15.01

(0.11)

16.2499 18-Apr-37

15.02

14.81

(0.03)

Source: Zedcrest Dealing Desk



Treasury Bills

Yields in the T-bills market trended slightly higher by c.15bps amid a relatively tigher level of system liqudity which came on the back of the significant OMO sale in the previous sesssion. 

Opening next week, we expect yields to remain elevated due to expectations for further debits for a wholesale SMIS acution by the CBN on Monday.

 


Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

1-Nov-18

13.00

12.75

0.25

6-Dec-18

13.00

12.75

0.25

3-Jan-19

12.75

12.30

0.00

14-Feb-19

12.90

12.50

0.15

14-Mar-19

12.70

12.25

0.00

4-Apr-19

12.50

12.20

0.00

18-Jul-19

13.00

12.45

0.00

1-Aug-19

13.00

12.50

0.00

12-Sep-19

13.25

12.75

0.00

Source: Zedcrest Dealing Desk 

 

Money Market

The OBB and OVN rates shot significantly higher by c.10pct to 20.86% and 22.50% respectively, following a significant squeeze in system liquidity from the OMO auctions in the previous session. System liquidity published by the CBN opening today, fell below analysts expectation at c.76bn, consequently driving the funding rates significantly higher.

 

We expect rates to remain elevated due to expected outflows for a wholesale SMIS by the CBN on Monday, which is likely to wipe off the existing system liquidity from its current positive levels.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

20.86

11.67

Overnight (O/N)

22.50

12.58

Source: FMDQ, Zedcrest Research 

 

 

FX Market

At the Interbank, the Naira/USD rate remained stable N360.40/$ (spot) and N361.34/$ (SMIS). At the I&E FX window a total of $62.54mn was traded in 258 deals, with rates ranging between N345.00/$ - N365.00/$. The NAFEX closing rate depreciated by c.0.07% to N363.82/$ from N363.57/$ previously.

 

At the parallel market, the cash rate remained stable at N359.50/$, while the transfer rate appreciated by 20k to N362.80/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.40

306.40

CBN SMIS

361.34

361.34

I&E FX Window

363.82

363.57

Cash Market

359.50

359.50

Transfer Market

362.80

363.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA sovereigns remained bearish in today’s session, with yields trending higher by c.5bps on average, amid a continued rise in US treasuries following a better than expected unemployment report. The most losses were still on the 30-yr which lost c.0.90pct on the day.

                                                                                            

The NGERIA Corps were mostly quiet, except for slight interests witnessed on the ACCESS 21s Snr and Subs, which gained about 0.15pct and 0.25pct on the day respectively.




Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.


 

 

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5.       Money Market Rate Increased as Overnight Rate Rose to 7.17%

6.       Bond Yields Test Key Support in Month End Rally

7.       Bond Yields Compress, as Investors Rally the Long End

8.      September 2018 FGN Bond Auction Oversubscribed

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10.   Funding Rates Spike As CBN Reverses Paris Club Credits

 

 

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