Market Sentiment remains weak as EM pressures Persist

Proshare

Thursday, August 16, 2018 /07:24PM / Zedcrest Capital

***Nigeria’s inflation drops to 11.14% in July*** — NBS

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.14%

As at August15, 2018,9bps down from 11.23% recorded in June 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$46.51bn

As atAugust 14, 2018. A c.0.10% decreasefrom $46.55bn as at August 13, 2018.

Brent Crude

$71.33pb

As at August 16, 2018. A c.0.68% increasefrom$70.85pb as atAugust 15, 2018

 

Bonds

Yields in the bond market retraced slightly from previous day highs, as market playersreacted to the lowerstop rates at the previous day’s primary market auction. Yields compressed by c.9bps on the average, with the most gains witnessed on the short-end of the curve.

 

We however observed continued sell pressures on the mid to long end of the curve, and we expect the trend to persist,asselloff in EM assets and a continued strengthening of the US Dollar is expected to further weigh on sentiments in the market.

 

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.86

13.24

(0.10)

14.50 15-Jul-21

14.31

14.22

(0.08)

16.39 27-Jan-22

13.93

13.79

(0.24)

14.20 14-Mar-24

14.57

14.29

(0.16)

12.50 22-Jan-26

14.80

14.61

(0.11)

16.29 17-Mar-27

14.79

14.68

(0.04)

13.98 23-Feb-28

14.78

14.70

(0.11)

12.15 18-Jul-34

14.67

14.60

(0.07)

12.40 18-Mar-36

14.80

14.63

(0.05)

16.2499 18-Apr-37

14.84

14.52

0.06

Source: Zedcrest Dealing Desk


Treasury Bills

The T-bills market traded on a relatively flat note as the CBN resumed its OMO intervention to match inflows from Maturing bills. We also witnessed slight selloff by offshore clients which pushed yields higher on the shorter end of the curve.

Demand at today’s OMO auction was weak, as only a total of N153.54bn T-bills were sold of the N450bn offered.Stop rates were however maintained at 11.05% and 12.15% on the 91- and 203-day bills respectively.

We expect the market to remain slightly bearish tomorrow, due to the relatively weak demand in the market and an expected provisioning for a CBN retail FX auction by banks.

OMO – Auction Results

 

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N’bn)

 

91 days

11.05

100.00

24.68

24.68

 

203 days

12.15

350.00

128.86

128.86

 

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

13-Sep-18

10.20

10.00

(0.85)

4-Oct-18

11.50

10.50

0.45

1-Nov-18

11.80

11.55

0.10

6-Dec-18

12.15

11.95

(0.10)

3-Jan-19

12.35

12.15

0.00

14-Feb-19

12.40

12.20

0.05

14-Mar-19

12.15

11.90

(0.05)

4-Apr-19

12.15

11.55

(0.05)

18-Jul-19

12.00

11.15

0.35

Source: Zedcrest Dealing Desk

 

Money Market

Robust system liquidity saw OBB and OVN ratestrend lowerinto single digit territory, to closeat 7.83% and 8.50% respectively. The CBN floated an OMO auction to manage inflows from OMO T-bill maturities, but could only sell a total of N153.54bn due to weak demand. System liquidity consequently closed at c.N492.38bn positive on the day.

 

We expect funding rates to trend higher tomorrow as market players anticipate outflows for Bond Auction Settlement and Retail FX funding.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

7.83

9.50

Overnight (O/N)

8.50

10.08

Source: FMDQ, Zedcrest Researc
h

 

 

FX Market

The Naira depreciated at the interbank today, closing at N306.10/$ (0.02% lower than N306.05/$ previously). At the I&E FX window, the Naira also depreciated by 0.08% to close at N362.53/$.The cash market also saw depreciation of 0.08% to close at N359.80/$, while transfer rates appreciated by 27% to close at N362.00/$ (from N363.00/$ previously).

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.10

306.05

CBN SMIS

352.00

352.00

I&E FX Window

362.53

362.25

Cash Market

359.80

359.50

Transfer Market

362.00

363.00

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The bullish trend previously witnessed on the NGERIA Sovereigns came to a halt in today’s session, as investors sold off across most of the traded tickers. Yields consequently trended higher by c.3bps across the curve.

 

Trading on the NGERIA Corpswas mixed, with some demand noticed on select maturitiesespecially at the short-end of the curve. Overall, yields compressed across the curve by c.1bps on the average DoD.

            


Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.



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