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Market remains Aggressively Bullish as Uncertainty Surround expected NTB Calendar Release

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Friday, December 8, 2017 6:30PM / @ZedcrestCapital 

*** FAAC revenue declines by N25.3bn in Oct to N532.7bn***

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

$35.86billion

Accreted 1.97% as at 7th December from $35.73 as at 6th December 2017

Brent Crude

$63.60pb

Rose by 2.80% from $61.87pb on 7th December 2017


Bonds
The bond market remained significantly bullish today, with demand specifically focused on the 10– and 20-yr bonds, as market players continued to react to the aggressive decline in T-bill yields, coming on the Backdrop of the OMO auction discontinuance by the CBN and uncertainty around the Q1 2018 T-bills calendar. Average bond yields consequently declined by 19bps, capping a 45bps WoW decline, to close today at 14.26%. We expect this trend to be sustained ahead of next week's auction, but with a support level of 14.00% as observed in today’s trading. 
 

Table 1: Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

14.49

14.42

0.00

15.54 13-Feb-20

14.13

14.06

(0.27)

14.50 15-Jul-21

14.49

14.42

(0.12)

16.39 27-Jan-22

14.17

14.10

(0.18)

14.20 14-Mar-24

14.26

14.19

(0.34)

12.50 22-Jan-26

14.36

14.29

(0.19)

16.29 17-Mar-27

14.31

14.24

(0.30)

12.15 18-Jul-34

14.17

14.10

(0.14)

12.40 18-Mar-36

14.08

14.01

(0.23)

16.25 18-Apr-37

14.11

14.04

(0.17)

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Zedcrest Dealing Desk
 

Treasury Bills
We witnessed significant yield declines despite the light volumes traded in the T-bills space today, as market players remained aggressively bullish, whilst holding on to their long positions. This downward trend has persisted on the backdrop of the aforementioned factors in the bond commentary and we expect this trend to persist, in as much as the CBN maintains its current policy direction. No specific support levels in view, but rates at 10% looks plausible, especially on the long end of the curve where we saw some trades done at sub 13 levels (18-oct in particular). This is however barring a resumption in OMO T-bill issuance by the CBN.  

Table 2: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

4-Jan-18

15.00

14.75

(1.00)

1-Feb-18

15.60

15.35

(0.40)

1-Mar-18

14.00

13.75

0.00

5-Apr-18

15.45

15.20

0.00

3-May-18

15.35

15.10

(0.30)

14-Jun-18

15.50

15.25

0.00

5-Jul-18

15.00

14.75

(0.60)

2-Aug-18

15.50

15.25

0.00

20-Sep-18

14.20

13.95

(0.65)

4-Oct-18

13.80

13.55

(0.95)

1-Nov-18

13.50

13.25

(0.75)

Source: Zedcrest Dealing Desk 

Money Market
The OBB and OVN rates remained stable to close at 5.17% and 6.25%, as there were no significant outflows witnessed in the market. System liquidity is consequently estimated to remain pretty much unchanged from its opening level of N78bn positive. We expect rates to remain relatively stable opening next week, as expected inflows from FAAC and Retail FX refunds are expected to sustain the boisterous money market liquidity, in the absence of any significant liquidity management action by the CBN.  

Table 3: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

5.17

6.33

Overnight (O/N)

6.25

7.33

Source: FMDQ, Zedcrest Research  

FX Market
The CBN Official spot rate appreciated marginally by 0.02% to N306.40/$ from N306.45/$ recorded in the previous session. Rates at the Investors and exporters FX window fell slightly by 10k to close at N360.41/$. Rates at the parallel market however remained stable at N361.40/$. 

Table 4: FX Rates

 

Current (N/$)

Previous (N/$)

CBN Spot

306.40

306.45

CBN SMIS

330.00

330.00

I&E FX Window

360.41

360.31

Parallel Market

361.40

361.40

Source: CBN, FMDQ, REXEL BDC 

For more details email research@zedcrestcapital.com or call the dealing desk via 01-6311667 
 

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