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Funding Rates Spike to One Month High Amid CBN FX Interventions

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Monday, May 07, 2018 07:20 PM/Zedcrest Capital

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Bonds

The bond market traded on a very quiet note following absence of major offshore players observing the May Bank holiday in the UK. We observed some pullback in yields as there was no offshore selling which caused the significant uptick in yields in the previous session. The 10-yr bonds however remained weak, with investors still slightly bearish on them. Yields consequently compressed by c.12bps, falling below its 3-week high recorded last Friday. We expect the market to trade with mixed sentiments tomorrow, as market players begin to speculate on a further decline in inflation whilst being wary of continued selloff by offshore players who have been taking profits on EM bonds due to continued strengthening of the US dollar.


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Treasury Bills

The T-bills market was also scantily traded, with slight sell witnessed on the shorter end of the curve, following outflows for wholesale FX interventions by the CBN. We expect sentiments in the market to remain mixed as market players anticipate another OMO auction on Thursday when we have c.N273bn in maturing bills.


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Money Market

The OBB and OVN rates rose to 7.58% and 8.17% respectively, its highest level since the 31st of March. This came on the back of system outflows for Wholesale FX interventions by the CBN, which consequently squeezed system liquidity further to c.N150bn positive est. as at COB today. We expect rates to decline slightly, as there are no significant funding pressures expected tomorrow.


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FX Market

The Interbank rate was reset higher by the CBN by 18bps to N305.75/$. This was following its intervention of $210m in the wholesale, SME and invisibles segment of the market. The NAFEX also depreciated further by 0.04% to N360.91/$, while rates in the Unofficial market appreciated by 0.03% to N361.40/$.


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Eurobonds

Trading in Nigerian Eurobonds were muted in the absence of the major offshore dealers observing the May Bank holiday. Yields on the NGERIA Sovereigns consequently compressed by c.15ps in absence of the strong sell pressures witnessed in previous sessions.

 

Only Few trades were witnessed in the NGERIA Corps, mainly on the longer dated tickers (Zenith, UBANL and FIDBAN 22s), which remained slightly bearish. The GRTBNL 18s and FBNNLs 21 were also slightly bearish. 

 

 

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