Markets Trade Cautiously Over Expected Supply From Primary Markets

Proshare

Thursday, November 08, 2018/ 07.51AM / Zedcrest Capital

*** Carlyle-Backed Diamond Bank Gets Cash Offer From Unnamed Investor – Report***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at October 16, 2018, 5bps up from 11.23% recorded in August 2018.

MPR

14.00%

Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting

External Reserves

$41.79bn

As at November 6, 2018. A c.0.08% decrease from $41.82bn on November 5, 2018

Brent Crude

$72.13pb

As at November 7, 2018. A c.0.71% increase from $71.62pb on November 6, 2018

 

Bonds

The FGN bond market traded on a quiet note with low trading volumes (less than N1bn) seen across the curve. Uncertainty on the direction of yields in the interim saw cautious trading by market participants, with tepid interest witnessed across some maturities.

 

We expect the market to remain order driven, however, with a more bearish bias as market participants maintain a risk neutral approach for bonds in the near term.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.58

14.14

0.13

14.50 15-Jul-21

15.29

15.06

0.02

16.39 27-Jan-22

15.11

14.33

(0.02)

14.20 14-Mar-24

15.31

15.16

0.00

12.50 22-Jan-26

15.63

15.47

0.03

16.29 17-Mar-27

15.62

15.45

(0.03)

13.98 23-Feb-28

15.83

15.68

0.06

12.15 18-Jul-34

15.85

15.65

0.06

12.40 18-Mar-36

15.69

15.59

0.01

16.2499 18-Apr-37

15.41

15.30

0.00

Source: Zedcrest Dealing Desk

 

Treasury Bills

T-bills market also traded cautious in today’s session, as market participants anticipate further supply of securities via an OMO auction this week. We witnessed pockets of order-driven trades as yields rose marginally by 0.01bps across the T-bills curve.

 

With OMO maturities of c.N375.98bn expected tomorrow, the CBN is expected to float an OMO auction tomorrow to manage the excess liquidity. We expect the market to trade with bearish sentiments due to continuous supply of securities.

 

Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

6-Dec-18

12.50

11.85

0.00

3-Jan-19

12.80

12.30

0.00

14-Feb-19

12.60

12.45

(0.10)

14-Mar-19

12.80

12.25

0.00

4-Apr-19

12.75

12.25

0.00

18-Jul-19

13.00

12.70

0.00

1-Aug-19

13.70

13.00

0.20

12-Sep-19

14.35

14.25

0.00

3-Oct-19

14.50

14.25

0.00

Source: Zedcrest Dealing Desk

 

Money Market

Interest rates dropped today by c.100bps to close at 3.83% and 4.58% for OBB and OVN rates respectively due to the robust system liquidity, currently at c.N485bn.

 

OMO T-bills maturities of c.N375.98bn and retail FX bids refund will prompt the CBN to float an OMO auction tomorrow to mop up excess funds from the banking system. Funding rates are consequently expected to move in line with the level of liquidity in the Money Market.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

3.83

4.83

Overnight (O/N)

4.58

5.42

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank, the Naira/USD spot and SMIS rates remained unchanged to close at N306.65/$ and N361.45/$ respectively. However, at the I&E FX window, the NAFEX closing rate depreciated by c.0.01% to N363.58/$ from N364.54/$ previously.

 

At the parallel market segment, the cash rates depreciated by 0.06% to close at N361.20 (from N361.00) while transfer rates remained unchanged at N364.50/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.65

306.65

CBN SMIS

361.45

361.45

I&E FX Window

363.58

363.54

Cash Market

361.20

361.00

Transfer Market

364.50

364.50

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The NGERIA Sovereigns saw muted trading activity in today’s trading session with little market reaction to the outcome of midterm elections held in the U.S. Client interests were witnessed on the NGERIA 23s, 38s and 48s as yields compressed marginally by c.2bps across the curve.

               

NIGERIA Corps saw more trading activity with interests witnessed across the traded tickers. DIAMBK 19s continued to receive the most interest as clients continue to digest news flow including reports hinting a possible cash injection from a major investor to increase its stake in the bank.

 

With the $276m of GRTBNL 18s set to mature later this week, we expect further demand from local investors for NGERIA Sovereign and Corps papers.


 

 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.



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