Funding Rates Spike as CBN Resumes OMO with c.N325bn Sale

Proshare

Wednesday, April 03, 2019  07:00 AM / Zedcrest Capital

***Senate to pass 2019 Budget April 16***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.31%

As at March 15, 2019. A c.6bps decline from 11.37% recorded in January 2019

MPR

13.50%

Cut by 50bps to 13.50% at the Mar. 26, 2019 MPC Meeting

External Reserves

$44.43bn

As at March 29, 2019. A c.0.20% increase from $44.34bn on March 28, 2019

Brent Crude

$69.47pb

As at April 2, 2019. A c.0.67% increase from $69.01pb on April 1, 2019

 

 

Bonds

The FGN Bond market remained relatively quiet with yields ticking slightly higher by c.3bps following slight sell on the short end of the curve which came on the back of an OMO resumption by the CBN.

 

The market appears to still be net long of bonds, whilst demand interests have been quieter in absence of the significant offshore flows witnessed in the previous quarter. We consequently expect yields to maintain its current range (14.00% – 14.50%) in the near term, as market players look forward to the release of the DMO’s Q2 calendar to evaluate the expected amount of bond supply for Q2 2019.

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.63

14.05

0.14

16.39 27-Jan-22

14.32

14.02

0.00

12.75 27-Apr-23

14.32

13.93

0.13

14.20 14-Mar-24

14.34

13.86

(0.01)

13.53 23-Mar-25

14.32

14.10

0.12

12.50 22-Jan-26

14.43

14.25

(0.03)

16.29 17-Mar-27

14.41

14.31

(0.01)

13.98 23-Feb-28

14.36

14.26

(0.06)

12.15 18-Jul-34

14.34

14.25

(0.02)

12.40 18-Mar-36

14.38

14.29

0.08

16.2499 18-Apr-37

14.33

14.15

0.03

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market traded on a relatively quiet note with yields rising marginally higher by c.4bps following slight sell on the long end of the curve, which came on the back of the OMO resumption by the CBN.

The CBN renewed its OMO offering with a signifcant sale of c.N325bn of the N200bn offered, in a bid to mop up the excess system liqudity from the FAAC inflows last week. The stop rates across the three tenors offered were relatively unchnaged from previous levels, clearing at 11.78% (-2bps), 13.00% (+2bps) and 13.04% (unchgd) on the 86, 163 and 352 day bills respectively.

The CBN will conduct an NTB primary Market auction on behalf of the FG tomorrow, with N10bn, N17.6bn and N68.08bn of the 91, 182 and 364-day bills respectively on offer. We expect the stop rates at the auction to clear slightly above their previous levels due to the renewed OMO sale by the CBN today.

NTB Auction Expectations

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

10.00

10.60 - 10.90

10.30

182 days

17.60

12.25 - 12.55

12.20

364 days

68.08

12.35 - 12.65

12.35

Source: Zedcrest Research

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Apr-19

11.25

10.00

0.00

2-May-19

12.25

11.50

0.00

13-Jun-19

12.00

11.20

0.00

18-Jul-19

12.20

12.00

0.00

1-Aug-19

13.10

12.95

(0.15)

12-Sep-19

12.95

12.85

0.00

3-Oct-19

13.10

13.00

0.00

14-Nov-19

13.10

12.95

0.15

5-Dec-19

12.95

12.75

0.15

2-Jan-20

13.05

12.85

0.10

6-Feb-20

11.25

10.00

0.00

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates in the money market spiked by c.10pct following outflows for the c.N325bn OMO sale and c.N75bn funding for the CBN’s weekly wholesale FX auction, which mopped up most of the existing system liquidity which opened the day at c.N405bn positive. The OBB and OVN rates consequently ended the session at 16.57% and 17.43% respectively.

We expect rates to moderate slightly lower tomorrow, as banks would be able to access the CBN’s SLF for their funding needs at slightly lower rates.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

16.57

5.00

Overnight (O/N)

17.43

5.57

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, the Naira/USD rate weakened slightly by 0.02% to N307.00/$ at the spot market, while the SMIS rate remained unchanged at N355.78/$. The NAFEX closing rate in the I&E window however appreciated further by 0.08% to N360.30/$, as market turnover improved markedly by 160% to $405m. At the parallel market, the cash rate appreciated by 0.08% to N358.00/$ whilst the transfer rate remained unchanged at N364.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

307.00

306.95

CBN SMIS

355.78

355.78

I&E FX Window

360.30

360.60

Cash Market

358.00

358.30

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

Interests on the NGERIA Sovereigns softened in today’s session, with yields compressing marginally by c.1bp on the day, whilst we witnessed slight profit taking on some maturities (38s and 49s).

 

In the NGERIA Corps, Investors interests remained firm on the longer dated tickers (22s – 23s).


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

                                                                                                                      

 

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