Funding rates Crash below 5% as CBN Holds off on OMO ahead of Sallah Break

Proshare

Thursday, June 14, 2018 07:59PM / Zedcrest Capital

*** FX Cash rates hit new high of N360/$ as CBN sustains interventions to BDCs***

*** External Reserves Recover by $200m in one Week***

 

KEY INDICATORS

Inflation

11.61%

Declined by 0.87% in May from 12.48% in April 2018

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting 0n 4 April 2018

External Reserves

$47.63billion

Rose by 0.42% as at 13 June from $47.43bn as at 7 June 2018

Brent Crude

   

$76.12pb

Fell by 0.39% from $76.42pb on 13 June 2018

 

 

Bonds

The bond market traded on a relatively quiet note, with yields ticking slightly higher by c.2bps on average, mostly driven by client flows on the medium to long end of the curve. We witnessed selling interests on the 28s and 36s, whilst there was some cherry-picking on the 2034 bonds. We expect the market to remain slightly bearish, with yields expected to tick slightly higher, especially on the longer end of the curve. 


FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

11.94

11.58

(0.01)

15.54 13-Feb-20

12.81

12.31

(0.03)

14.50 15-Jul-21

13.41

13.31

0.04

16.39 27-Jan-22

13.19

13.09

0.03

14.20 14-Mar-24

13.32

13.12

0.07

12.50 22-Jan-26

13.45

13.38

(0.03)

16.29 17-Mar-27

13.35

13.30

0.03

13.98 23-Feb-28

13.49

13.33

0.17

12.15 18-Jul-34

13.61

13.56

(0.06)

12.40 18-Mar-36

13.63

13.54

0.03

16.2499 18-Apr-37

13.59

13.48

0.02

Source: Zedcrest Dealing Desk

  

Treasury Bills

The T-bills Market traded on a slightly bullish note with yields trending lower by c.12bps across the curve. This came as the CBN failed to conduct an OMO auction to mop up excess inflows of c.N244bn from maturing OMO treasury bills. We expect  yields to trend slightly higher opening next week, as the CBN is expected to conduct an OMO auction to Mop up the excess liquidity in the System.

 

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

5-Jul-18

12.00

11.85

(1.00)

2-Aug-18

13.00

12.05

0.80

13-Sep-18

12.50

11.00

0.50

4-Oct-18

12.25

12.10

0.00

1-Nov-18

12.30

12.20

0.10

6-Dec-18

12.30

12.10

0.05

3-Jan-19

12.15

12.05

(0.10)

14-Feb-19

12.45

10.00

0.25

14-Mar-19

12.45

10.00

0.20

4-Apr-19

12.45

10.00

0.20

Source: Zedcrest Dealing Desk


Money Market

The OBB and OVN rates crashed significantly by c.11pct to 3.67% and 4.25%, as system liquidity rose significantly higher to c.N380bn est, on the back of inflows from maturing OMO bills. We expect rates to trend higher upon resumption from the Sallah break as the CBN is expected to conduct an OMO auction to mop up the excess system liquidity.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

3.67

15.17

Overnight (O/N)

4.25

15.67

Source: FMDQ, Zedcrest Research 

 

FX Market

The Interbank rate appreciated by 0.02% to N305.85/$ from its previous rate of N305.90/$. This was following a recovery in the CBN’s external reserves by c.$200m to $47.63bn as at 13-Jun from $47.43bn as at 7-Jun. The I&E FX rate remained relatively stable at N361.07/$. In the parallel market, cash rates appreciated further by 70k to a high of N360.00/$, while the transfer market rate remained stable at N364.00/$.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.85

305.90

CBN SMIS

330.00

330.00

I&E FX Window

361.07

361.10

Cash Market

360.00

360.70

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds:

The NGERIA Sovereigns look to have bottomed out from the intense bearish pressures witnessed in the build up to the US FED rate hike decision, as yields compressed by c.10bps due to some cherry-picking by investors across the curve. The 2038s and 2047s were the most lifted rising by slightly more than a point form their previous day lows.

 

The NGERIA Corps however remained in the reverse, with investors still bearish on most of the bonds. We witnessed the most selloffs on the Access 21s Snr, which has now risen by c.109bps (-2.70pt) w/w.  The Zenith 22s and GRTBNL 18s however posted marginal gains, with yields compressing by c.2bps.



Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.

 

 

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