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Funding Rates remain elevated as the CBN maintains its FX and OMO T-bill Interventions

Proshare

Monday, November 27, 2017 7:00PM/ Zedcrest capital  

Bonds

The bond market was relatively quiet today, with some sell on the 2027s bond taking yields slightly higher by 2bps across the curve. Average bond yields consequently rose to 14.61% from 14.59% in the previous session. We expect the yields to tick slightly higher tomorrow, due to lack of significant demand from clients at current levels.

 

Table 1: Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

14.73

14.66

0.04

15.54 13-Feb-20

14.41

14.34

0.05

14.50 15-Jul-21

14.81

14.74

0.04

16.39 27-Jan-22

14.40

14.33

(0.02)

14.20 14-Mar-24

14.70

14.63

0.00

12.50 22-Jan-26

14.65

14.58

0.00

16.29 17-Mar-27

14.86

14.79

0.04

12.15 18-Jul-34

14.49

14.42

0.02

12.40 18-Mar-36

14.59

14.52

0.00

16.25 18-Apr-37

14.46

14.39

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Source: Zedcrest Dealing Desk 

Treasury Bills

The T-bills market traded on a slightly bearish note, with some sell on the short end of the curve (Dec maturities) which rose by about 88bps due to the tight liquidity in the market, coming on the backdrop of the FX interventions and OMO T-bill sales (N48bn) by the CBN. The CBN sold N200million 87-day and N47.82billion 199day OMO bills, with rates declining by another 5bps to 15.85% and 17.60% respectively. We expect the market to be slightly bullish tomorrow, as market players anticipate inflows from retail FX refunds.

 

Table 2: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

7-Dec-17

15.90

15.65

0.30

4-Jan-18

16.50

16.25

0.10

1-Feb-18

16.80

16.55

0.00

1-Mar-18

15.25

15.00

(0.15)

5-Apr-18

16.90

16.65

0.00

3-May-18

17.55

17.30

0.00

14-Jun-18

17.70

17.45

0.15

5-Jul-18

17.55

17.30

0.25

2-Aug-18

16.75

16.50

0.00

13-Sep-18

15.30

15.05

0.00

4-Oct-18

15.25

15.00

0.00

Source: Zedcrest Dealing Desk 

 

Table 3: OMO -November 27, 2017

Tenor

Rate (%)

Offer (NBn)

Sub (N'bn)

Sale (N'bn)

 87 day

15.85

20.00

0.20

0.20

199 day

17.60

70.00

47.82

47.82

Source: CBN 

 

Money Market

The OBB and OVN rates remained elevated at 32.50% and 35.33%, as the CBN maintained its FX interventions in the Wholesale, SME and Invisibles segment of the FX market ($195m est.), combined with OMO T-bill sales of c.N48bn. System liquidity is consequently estimated to decline to N224billion from a negative opening figure of N112billion. We expect rates to trend lower tomorrow, as market players anticipate inflows from retail FX refunds by the CBN.

 

Table 4: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

32.50

30.83

Overnight (O/N)

35.33

32.58

Source: FMDQ, Zedcrest Research 

 

FX Market

The CBN Official spot rate appreciated slightly by 0.02% to N305.80/$ from its previous day rate of N305.85/$, as the CBN maintained its intervention in the Wholesale, SME and Invisibles segment of the market, with an estimated supply of $195million.

Rates at the Investors and exporters FX window closed at N360.32/$ from N360.25/$ in the previous session. Rates at the parallel market however appreciated slightly to N361.70/$ from its previous day rate of N361.80/$.

 

 

Table 5: FX Rates

 

Current (N/$)

Previous      (N/$)

CBN Spot

305.80

305.85

CBN SMIS

330.00

330.00

I&E FX Window

360.32

360.25

Parallel Market

361.70

361.80

Source: CBN, FMDQ, REXEL BDC

 

For more details email research@zedcrestcapital.com or call the dealing desk via 01-6311667  

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