| Bonds & Fixed Income |     3290 VIEWS  |
| Bonds & Fixed Income | |
| 3290 VIEWS | |
 |
Tuesday, December 12, 2017 6:00PM / @ZedcrestCapital
*** DMO to redeem N198 billion Treasury bills via $500m
Eurobond receipts***
***Plans to resume NTB Auction by 3rd January 2018***
***Will offer N50bn each of the 5 and 10-yr FGN bonds at an
auction tomorrow***
KEY INDICATORS
|
Inflation |
15.91% |
Declined by 0.07% in October from 15.98% in
September 2017 |
|
MPR |
14.00% |
Left unchanged at 14.00% at the MPC meeting of
November 2017 |
|
External Reserves |
$36.01billion |
Accreted 1.96% as at 8th December
from $35.86 as at 7th December 2017 |
|
Brent Crude |
$64.85pb |
Rose by 1.23% from $64.06pb on 11th
December 2017 |
Bonds
The bond market shed another 21bps in today’s
session, as the market reacted to news of the DMO’s plan to redeem all maturing
NTBs in the month of December. Trades were however scanty with the most trades
done on the 2027 bonds, due to the wideness in market spreads across the curve.
Yields on the 27s traded as low as 13.80% (bid), but retraced slightly to close
at 13.92% upon announcement by the DMO of plans to resume NTB issuances by 3rd
January. We expect a further decline in yields tomorrow, due to our
anticipation of significant oversubscriptions at tomorrow’s auction.
|
Table 1:
Benchmark FGN Bond Yields |
|||
|
Description |
Bid (%) |
Offer (%) |
Day Change
(%) |
|
16.00
29-Jun-19 |
13.61 |
13.54 |
(0.33) |
|
15.54
13-Feb-20 |
13.64 |
13.57 |
0.08 |
|
14.50
15-Jul-21 |
13.98 |
13.91 |
(0.34) |
|
16.39
27-Jan-22 |
13.77 |
13.70 |
(0.31) |
|
14.20
14-Mar-24 |
13.98 |
13.91 |
(0.09) |
|
12.50
22-Jan-26 |
14.00 |
13.93 |
(0.24) |
|
16.29
17-Mar-27 |
13.92 |
13.85 |
(0.33) |
|
12.15
18-Jul-34 |
13.87 |
13.80 |
(0.23) |
|
12.4018-Mar-36 |
13.93 |
13.86 |
(0.08) |
|
16.25
18-Apr-37 |
13.74 |
13.67 |
(0.20) |
Source: Zedcrest Dealing Desk
|
Table 2: Bond Auction Expectations |
||
|
Tenor |
Offer (N'bn) |
Expected Stop Rate (%) |
|
FGN Jul-2021 |
50.00 |
13.75 - 13.85 |
|
FGN Mar-2027 |
50.00 |
13.80 - 13.90 |
Treasury Bills
The T-bills market also reacted aggressively to
the news by the DMO, as offers across the benchmark NTB curve opened initially at
5.00%. The market however traded most bills around 8% - 12%, with slight sell
observed on some bills after the NTB issuance announcement by the CBN. Average
T-bill yields consequently dropped 128bps to close today at 14.26%. We expect
rates in the market to be relatively stable around these levels tomorrow, but
with slight profit taking expected on some maturities.
|
Table 3: Benchmark Treasury Bills
Rates |
|||
|
Description |
Bid (%) |
Offer (%) |
Day Change (%) |
|
4-Jan-18 |
12.00 |
11.75 |
(2.00) |
|
1-Feb-18 |
12.70 |
12.45 |
(2.90) |
|
1-Mar-18 |
12.00 |
11.75 |
(2.00) |
|
5-Apr-18 |
11.25 |
11.00 |
(2.25) |
|
3-May-18 |
12.00 |
11.75 |
(2.00) |
|
14-Jun-18 |
12.80 |
12.55 |
(1.70) |
|
5-Jul-18 |
11.50 |
11.25 |
(3.50) |
|
2-Aug-18 |
13.00 |
12.75 |
(2.50) |
|
20-Sep-18 |
12.50 |
12.25 |
(1.70) |
|
4-Oct-18 |
12.30 |
12.05 |
(1.50) |
|
1-Nov-18 |
12.45 |
12.20 |
(0.80) |
Source: Zedcrest Dealing Desk
Money Market
The
OBB and OVN rates declined further to close today at 2.33% and 2.92%, as system
liquidity remained significantly buoyant at about N439billion positive. We
expect rates to be relatively stable at these levels tomorrow, as there are no
significant outflows expected from the system.
|
Table 4: Money Market Rates |
||
|
|
Current (%) |
Previous (%) |
|
Open Buy Back (OBB) |
2.33 |
3.25 |
|
Overnight (O/N) |
2.92 |
4.08 |
Source: FMDQ, Zedcrest Research
FX Market
The CBN Official spot rate appreciated marginally
by 0.02% to N306.30/$ from N306.35/$ recorded in the previous session. Rates at
the Investors and exporters FX window also appreciated by 13k to close at
N360.37/$. Rates at the parallel market however depreciated slightly by 10k to
close at N361.50/$.
|
Table 5: FX Rates |
||
|
|
Current (N/$) |
Previous (N/$) |
|
CBN Spot |
306.30 |
306.35 |
|
CBN SMIS |
330.00 |
330.00 |
|
I&E FX Window |
360.37 |
360.50 |
|
Parallel Market |
361.50 |
361.40 |
Source: CBN, FMDQ, REXEL BDC
For more details email research@zedcrestcapital.com or
call the dealing desk via 01-6311667
Related
News
2.
System Liquidity
closes above N400bn as inflows from FAAC and FX Refunds Hit the System
3.
Market remains
Aggressively Bullish as Uncertainty Surround expected NTB Calendar Release
4.
FGN Bond Auction
Scheduled for December 2017
5.
Sustained
decline in Fixed Income yields as Market Players stay bullish
6.
States’ Debt
Burden Essentially Domestic
7.
Strong decline
in T-Bill Yields as CBN stays silent on OMO
8.
Invest in FGN
Monthly Bond Auction – December 2017
9.
Eurobond
Issuance: Dovish Outlook for FI Yields
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