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Market Players Trade with Mixed Sentiments amid OMO Uncertainty

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Friday, April 27, 2018 /9:20 PM/Zedcrest Capital

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Bonds

The Bond market closed the week on a relatively stable note, with yields compressing slightly by c.3bps on average. Trading sentiments were however mixed with only few trades executed throughout the session as market players remained skeptical of the recent changes in the trend of OMO issuance by the CBN. We expect yields to be relatively stable at sub-13% levels in the near term, barring a significant lift in OMO auction issuance rates and volumes, which could trigger some profit taking into the T-bills space.

 

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Treasury Bills

The T-bills market also traded with mixed sentiments and closed on a relatively flat note, as market players initially sold off on some short to medium tenured maturities upon announcement of an OMO auction by the CBN. They however came back buying as the CBN once again significantly prorated on the 244-day bill offered, selling only N22.05bn of the N435bn subscription on the bill, whilst selling once again to all banks at +5bps higher (12.05%). The CBN however sold to all subscriptions on the 97-day bill (N27.95bn) at a 5bps higher rate (10.95%) as well. We expect the market to be slightly bullish in the near term as the market remains awash with liquidity following inflows from FAAC payments to states and local governments. This is however barring a renewed and sizeable OMO auction sale by the CBN.

 

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Money Market

The OBB and OVN rates remained relatively stable at 2.83% and 3.42%, as inflows from retail FX refunds and FAAC payments helped offset outflows for today’s Retail FX sales and bond auction settlement. We expect rates to remain relatively stable opening next week, as system liquidity remains buoyant at c.N600bn positive. 

 

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FX Market

The Interbank rate remained stable at its previous rate of N305.65/$, even as the CBN conducted another round of Retail SMIS in the market. The NAFEX rate remained relatively unchanged at N360.41/$, with rates in the Unofficial market also stable at N361.50/$.

 

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Eurobonds

The NGERIA Sovereigns fell back slightly in today session following some sell especially on the 2047s and 2038s.

 

The NGERIA Corps remained slightly bearish, with investors selling off slightly, mostly on the shorter dated tickers, the GRTBNL 18s and DIAMBK 19s. Other tickers were relatively quiet, but with a slightly bearish bias. The SEPLLN 23s were traded slightly higher at 101.50.


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