Funding rates crash by c.14pct as inflows from OMO and PMA Repayments bolster System Liquidity

Proshare
Thursday, March 21, 2018 /11:00 PM /Zedcrest Capital

***Senate confirms 2 CBN Dep Govs, 3 MPC Nominees, rejects 1***
 


KEY INDICATORS

Inflation

14.33%

Declined by 0.80% in February from 15.13% in January 2018

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting of November 2017

External Reserves

$45.36billion

Accreted 1.54% as at 22 March from $45.20bn as at 21 March 2018

Brent Crude

$68.65pb

Fell by 0.28% from $68.83pb on 21 March 2018


Bonds

The Bond market turned bearish in today's session, as market players took profits on some positions held prior to the auction. We witnessed significant sell offs on the 2021 bonds especially as yields rose by c.6bps on average, reversing declines witnessed in the build up to the auction in the previous session. We expect yields to close the week on a slightly bearish note, as traders would be looking to stay light on their positions. Yields have however continued to hover around the 13.50% area, and we do not see them veering significantly off these levels in the near term. 

 

FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

13.63

13.56

0.12

15.54 13-Feb-20

13.53

13.46

0.17

14.50 15-Jul-21

13.55

13.48

0.11

16.39 27-Jan-22

13.46

13.39

0.02

14.20 14-Mar-24

13.51

13.44

0.02

12.50 22-Jan-26

13.57

13.50

0.05

16.29 17-Mar-27

13.57

13.50

0.02

12.15 18-Jul-34

13.53

13.46

0.01

12.40 18-Mar-36

13.41

13.34

0.05

16.25 18-Apr-37

13.34

13.27

0.03

 

 

 

 

                           

                                

 

 

 

                                
Source: Zedcrest Dealing Desk
 

Treasury Bills

The T-bills market traded on a slightly bullish note, with demand especially on the April and Nov maturities. This came as the CBN did not conduct an OMO auction, despite the significant inflows of c.N208bn from OMO and Net PMA repayments. We expect yields to close the week on a relatively calm note, as market players largely expect a resumption in OMO auctions in the coming week. 

 

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

12-Apr-18

13.75

13.60

(0.10)

3-May-18

14.35

14.20

0.00

14-Jun-18

14.15

14.00

0.10

5-Jul-18

14.20

14.05

0.00

2-Aug-18

14.05

13.45

0.00

13-Sep-18

14.05

13.90

0.00

4-Oct-18

14.20

14.05

0.00

1-Nov-18

14.35

14.20

(0.05)

3-Jan-19

13.35

13.20

(0.10)

14-Feb-19

13.25

13.10

0.00

Source: Zedcrest Dealing Desk

Money Market

The OBB and OVN rates crashed to 6.83% and 8.08% respectively, on the backdrop of inflows from OMO and PMA repayments which bolstered system liquidity to c.N325bn positive. We expect rates to close the week on a relatively calm note, due to the relatively boisterous system liquidity. This is however barring a significant OMO sale by the CBN.


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

6.83

20.00

Overnight (O/N)

8.08

22.08

Source: FMDQ, Zedcrest Researc h

 

FX Market

The Interbank rate remained stable at its previous rate of N305.70/$, with the CBN’s external reserves recorded to have improved by 1.54% to $45.36bn as of 21 March. The NAFEX rate appreciated by 0.05% to N360.12/$, with total volume traded dropping by 55% to $156m. Rates in the Unofficial market also appreciated strongly by 0.17% to N361.10/$, due to renewed supply of the greenback in that segment of the market.


FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.70

305.70

CBN SMIS

330.00

330.00

I&E FX Window

360.12

360.29

Parallel Market

361.10

361.70

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

Yields in the NGERIA Sovereign space declined by c.6bps, in a gradual recovery from the sell offs witnessed in the previous sessions prior to the FOMC’s interest rate decision. We witnessed most trades on the 2038 and 2047 bonds as market players hunted for the relatively higher yields on the long end of the curve (27s - 47s).  We expect this trend to persist, with yields still expected to decline slightly to their pre-selloff levels.

 

The Nigerian Banks were also slightly bullish on most tickers, except for continued bearish pressures witnessed on the 2022s (Zenith, UBANNL and FIDBAN). Investors were also slightly bearish on the Access 21s sub, while there were almost only bids for the ECOTRA 21s. The SEPLLN 23 is still trading close to par.  

Contact us:

Dealing Desk: 01-6311667   Dayo: 07032208237         Seyi: 08023231396            Nnamdi:+2348133385000   Email: research@zedcrestcapital.com

Disclaimer:
Whilst proper and reasonable care has been taken in the preparation and accuracy of the facts and figures presented in this report, no responsibility or liability is accepted by Zedcrest Capital or its employees for any error, omission or opinion expressed herein. This report is not an investment research or a research recommendation and should not be regarded as such. The information provided herein is by no means intended to provide a sufficient basis on which to make an investment decision

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