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Markets Turns Bearish as CBN Sells N443bn OMO bills

Proshare
Friday, March 16, 2018 /7:38 AM /Zedcrest Capital

***Nigeria's central bank aims for first rate meeting by April***- Emefiele
 

KEY INDICATORS

Inflation

14.33%

Declined by 0.80% in February from 15.13% in January 2018

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting of November 2017

External Reserves

$44.20billion

Accreted 1.59% as at 13 March from $43.62bn as at 12 March 2018

Brent Crude

$65.10pb

Rose by 0.95% from $64.49pb on 13 March 2018


Bonds

The bond market turned bearish in today’s session, reversing most of the yield declines witnessed in the previous two sessions. This came on the backdrop of a significant OMO auction by the CBN. Yields rose by c.15bps on average as market players priced in the relatively more attractive yield on the OMO bill sold at a c.16% yield. We expect continued support for yields at these levels, due to the CBN’s regular OMO interventions.

Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

13.57

13.50

0.15

15.54 13-Feb-20

13.65

13.58

0.14

14.50 15-Jul-21

13.60

13.53

0.19

16.39 27-Jan-22

13.64

13.57

0.13

14.20 14-Mar-24

13.70

13.63

0.10

12.50 22-Jan-26

13.63

13.56

0.08

16.29 17-Mar-27

13.60

13.53

0.11

12.15 18-Jul-34

13.62

13.55

0.24

12.40 18-Mar-36

13.46

13.39

0.21

16.25 18-Apr-37

13.42

13.35

0.18

Source: Zedcrest Dealing Desk 


Treasury Bills

The T-bills Market also traded on a bearish note with yields rising by c.15bps on average, due to the significant OMO sale of c.N444bn by the CBN. The 29-Nov bill offered is the longest tenured OMO bill on offer, even as the CBN retained the stop rate at 14.40%. We expect yields to inch slightly higher tomorrow, due to the relative squeeze in system liquidity and expected outflows for retail FX funding by banks.  

Benchmark Treasury Bill Yields

Description

Bid (%)

Offer (%)

Day Change (%)

12-Apr-18

13.55

13.40

0.40

3-May-18

14.50

14.35

0.05

14-Jun-18

14.00

13.85

0.10

5-Jul-18

14.00

13.85

0.15

2-Aug-18

14.00

13.45

0.05

13-Sep-18

13.75

13.60

0.25

4-Oct-18

14.25

14.10

0.20

1-Nov-18

14.05

13.90

0.15

3-Jan-19

13.10

12.95

0.10

14-Feb-19

13.40

13.25

0.15

Source: Zedcrest Dealing Desk 

OMO Auction Result

Tenor

Rate (%)

Offer (NBn)

Sub (N'bn)

Sale (N'bn)

 105 days

12.60

100.00

0.02

0.02

 259 days

14.40

300.00

443.76

443.76

Source: CBN

Money Market

The OBB and OVN rates inched slightly higher to close at 6.67% and 7.50% respectively. This came on the back of a squeeze in system liquidity via the CBN’s OMO Sale of c.N444bn. System liquidity is consequently estimated to close today at c.N426bn, as inflows from OMO and PMA repayments offset most of the outflows for OMO sales. We expect rates to trend higher tomorrow, due to expected outflows for retail FX funding by banks. 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

6.67

5.83

Overnight (O/N)

7.50

6.25

Source: FMDQ, Zedcrest Research

FX Market

The Interbank rate remained stable at its previous rate of N305.75/$, with the CBN’s external reserves also recorded to have improved by 1.59% to $44.20bn as of 13 March. The NAFEX rate appreciated further by 0.05% to close at N360.06/$, with total volume traded rising by 121% to $282m, bolstered by some offshore inflow for the CBN’s OMO auction. Rates in the Unofficial market depreciated slightly by 0.03% to N361.20/$.

 

FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.75

305.75

CBN SMIS

330.00

330.00

I&E FX Window

360.25

360.28

Parallel Market

361.30

361.20

Source: CBN, FMDQ, REXEL BDC 
 

Eurobonds

The NGERIA Sovereigns were well bided in today’s session with demand especially on the 27s, 32s and 47s, taking the curve lower by c.5bps on average.

We also witnessed strong interests in the
Nigerian Corporate and Banks
as investors bided for the DIAMBK 19s, Access 21s and FBNNL 21s, while there were bearish sentiments on the FIDBAN 18s and Zenith 22s. The Newly issued SEPLLN 23s also witnessed slightly favorable demand, with most bids slightly above 100, while it was last traded at 99.75 (9.312%).

  


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