Local Bond yields rise by 45bps W/W, as offshore players react to sell off in global markets

Proshare

Friday, February 9, 2018, 10.00PM/Zedcrest Capital

***Nigeria’s FX Inflow Hits $30.45bn In Fourth Quarter***

Proshare Nigeria Pvt. Ltd.

Bonds

The Bond market remained bearish in today’s session, with continued sell off from offshore players lifting yields by c.8bps across the curve, consequently marking a 45bps w/w rise in average bond yields. This came on the backdrop of the weakness in global financial markets caused by rising fears of inflation and monetary policy tightening, especially in the US. FGN bond Yields have however been resistant at sub-14% and we do not see them going significantly above these levels, whilst  also noting the weakness in local demand observed in recent sessions.


Proshare Nigeria Pvt. Ltd.

 

Treasury Bills

The T-bills market traded on a slightly bullish note, as market players cherry picked some high yielding bills in anticipation of inflows from retail FX refunds expected on Monday.  The CBN also conducted an OMO auction, selling a total of c.N14bn of the 111-day and 251-day bills on offer, at 12.60% and 14.40% respectively. We expect average T-bill yields to remain slightly elevated above 15% due to the tight system liquidity and continued OMO interventions by the CBN.

 

 Proshare Nigeria Pvt. Ltd.


Money Market

The OBB and OVN rates declined slightly to 43.33% and 45.50%, as banks were less aggressive in their OMO auction demand whilst also anticipating inflows from retail FX refunds. System liquidity is estimated to close at c.N33bn long, following debits for today’s OMO auction. We expect rates to decline slightly on Monday, with inflows from retail FX refunds expected to ease funding pressures, barring a significant OMO T-bill sale by the CBN.

 

 Proshare Nigeria Pvt. Ltd.


FX Market

The CBN Official spot rate remained stable at its previous day rate of N305.85/$, with external reserves recorded to have improved by 1.74% to $41.01bn as at 7th of February, 2018. The CBN also released result of its retail SMIS, showing a total sale of $325mn to the agricultural, airlines, petroleum products and raw materials and machinery sectors.

The spot rate in the Investors and Exporters’ FX Window appreciated by 0.04% to close at N360.27/$ from N360.40/$ in the previous session.

Rates in the Unofficial market however depreciated by 0.03% to N361.50/$.

 Proshare Nigeria Pvt. Ltd.

 

Related News

1.       Ahead of Next T-bills Auction Scheduled 14th February, 2018

2.       Bearish Flattening on Bonds, despite continued offshore sell on the 10-yr

3.       CBN releases No-Sale OMO Result, as Finance Minister Announces Prospective $2.5bn Eurobond Issuance

4.       FGN Savings Bond February 2018 Offer

5.       Funding Pressures Push Lending Rates above 30%, amid Continued Sell off on Bonds

6.       Bond Yields Rise on Weak Local Demand and Slight Offshore Sell

7.       DMO issues 2 and 3 year Savings Bonds at 10.277% and 11.277% respectively

8.       Nigeria’s Re-Inclusion to the JP Morgan Index, How Feasible?

 

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