Investors Look To Secondary Market To Fill Unmet Demand At Previous Day’s Auction

Proshare

Thursday, December 20, 2018/ 07:04PM / Zedcrest Capital

***CBN conducts Special OMO Auction to mop up OMO maturities***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at December 14, 2018. A c.2bps increase from 11.26% recorded in October 2018

MPR

14.00%

Left Unchanged for the 12th Consecutive Time at the Nov. 22, 2018 MPC Meeting

External Reserves

$43.08bn

As at December 18, 2018. A c.0.09% increase from $43.04bn on December 17, 2018

Brent Crude

$55.55pb

As at December 20, 2018. A c.2.05% decrease from $56.71b on December 19, 2018

 


Bonds

The FGN Bond market reacted positively to the low volumes sold at the previous day’s Bond auction. Yields compressed by c.11bps on the average across the Bond curve, as participants adjusted to accommodate the expected demand. We witnessed demand at the mid-end of the curve, especially the 2027s and 2028s maturities, which saw yields compress by c.18bps in that space.

 

We expect the bullish sentiments to remain short-lived as investor demand at current yield levels remains weak. Deteriorating economic indicators (e.g. unemployment) as well as weak outlook for global oil prices continue to support our bearish outlook for bonds for the rest of the year.


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.29

14.50

0.00

14.50 15-Jul-21

15.61

15.39

(0.19)

16.39 27-Jan-22

15.10

14.90

(0.02)

14.20 14-Mar-24

15.09

14.97

(0.17)

12.50 22-Jan-26

15.69

15.37

(0.09)

16.29 17-Mar-27

15.61

15.45

(0.15)

13.98 23-Feb-28

15.64

15.51

(0.21)

12.15 18-Jul-34

15.62

15.52

(0.09)

12.40 18-Mar-36

15.59

15.40

(0.06)

16.2499 18-Apr-37

15.49

15.34

(0.08)

Source: Zedcrest Dealing Desk

 


 

Treasury Bills

The T-bills market saw some reprieve as NTB & OMO maturities of N497.81bn hit the system. Yields across the mid- to long-end of the Benchmark NTB curve compressed by c.8bps on the average following slight investor demand on those maturities. The short-end however remained bearish, with yields expanding by c.23bps on the average at the end of the NTB curve.

The CBN consequently rolled over c.95% of the total amount of maturing OMO bills at today’s OMO auction, maintaining rates across the tenors on offer. The CBN sold a total of c.N471.24 across the three maturities on offer, including special OMO sales of N195.50bn.

We expect yields to remain elevated to close the week as market liquidity shrinks from expected outflows.


OMO Auction Result

Tenor

Rate (%)

Offer (₦’bn)

Sub (₦'bn)

Sale (₦'bn)

98-day

11.90

50.00

6.62

6.62

189-day

13.50

150.00

16.72

16.72

364-day

15.00

350.00

252.40

252.40

364-day
(Special)

15.00

0.00

0.00

195.50


Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Jan-19

15.50

14.80

0.25

14-Feb-19

15.00

14.50

0.50

14-Mar-19

14.00

13.50

(0.05)

4-Apr-19

14.00

13.70

(0.05)

2-May-19

13.60

13.25

0.00

13-Jun-19

13.60

13.40

(0.20)

18-Jul-19

13.75

13.20

(0.05)

1-Aug-19

14.00

13.75

(0.25)

12-Sep-19

15.00

14.75

0.00

3-Oct-19

15.00

14.90

(0.05)

14-Nov-19

14.80

14.50

(0.05)

5-Dec-19

15.00

14.80

(0.05)

Source: Zedcrest Dealing Desk


 

Money Market

Money Market rates closed lower on the day, despite liquidity mop up by the CBN via the sale of OMO securities (c.N471.24bn). Open Buy-Back (OBB) and overnight (O/N) dropped to 13.58% (from 21.71%) and 14.83% (from 23.07%) respectively due to OMO maturities of c.N497.81bn. Consequently, System Liquidity is estimated to close in a negative territory of c.N52bn.

We expect rates to close the week higher as market participants provide funding for FX Retail interventions by the CBN.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

13.58

21.71

Overnight (O/N)

14.83

23.07

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (spot) and N359.24/$ (SMIS), while the NAFEX rate in the I&E window appreciated marginally by c.0.10% to N364.57/$ from N364.93/$ previously. Value traded at the I&E FX window increased by c.21% day-on-day, with a total trade turnover of $319.96mm traded in 468 deals, with rates ranging between N362.50/$ - N367.00/$.

 

At the parallel market, the cash and transfer rates appreciated by c.0.27% to close at N364.00/$ and N367.00/$ respectively.


FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

359.24

359.24

I&E FX Window

364.57

364.93

Cash Market

364.00

365.00

Transfer Market

367.00

368.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns continued its bearish run, with yields ticking further higher by c.4bps on the average across the curve, in light of pressures from lower global oil prices and a rate hike by the US FOMC yesterday.

 

It was a quiet trading session on the day for the NGERIA Corps, especially on the Diambk 19s as further details emerge of the proposed merger of Access and Diamond Banks. Sellers remained on the ACCESS 21s Subs, as yields on that paper expanded further by c.7bps from the previous close.

 



 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd. 

 

 

Related News

1.       Summary of December 2018 FGN Bond Auction Results

2.      DMO’s Weak Borrowing Appetite Forces 10-yr Auction Rate 33bps Lower

3.      DMO to offer N70bn FGN Bonds tomorrow as N100bn FGN Sukkuk Bond Offer Closes

4.      Diamond Bank Eurobond Rallies 800bps Following Merger Announcement

5.      Average Yields on Long Term Bills Remain at Over 17.0% on Aggressive OMO Mop Ups

6.      Average Market Rate Rose By 0.69% To Settle At 25.89% As CBN Continued Its Liquidity Mop Up

7.      T-Bills Market Ends Bearish as CBN Conducts Special OMO Auction

8.      Funding Rates Moderate, as Market Players Undersubscribe CBN OMO

9.      Bond Yields Pare Losses amid Renewed Local Demand

 

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