Monetary Policy Remains Unchanged With Minimal Volatility Expected For The Fixed Income Market

Proshare

Friday, November 23, 2018/ 07:30AM / Zedcrest Capital

***MPC unanimously agrees to hold benchmark interest rate and other monetary policy indices***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.26%

As at November 21, 2018. A c.2bps down from 11.28% recorded in September 2018

MPR

14.00%

Left Unchanged for the 12th Consecutive Time at the Nov. 22, 2018 MPC Meeting

External Reserves

$41.56bn

As at November 19, 2018. A c.0.10% decrease from $41.60bn on November 16, 2018

Brent Crude

$63.15pb

As at November 22, 2018. A c.0.83% decrease from $63.68pb on November 21, 2018

 

Bonds

The FGN bond auction results of yesterday took its toll on the market as trading activities remained muted for most part of the trading session. Some offshore investors sell-off was seen towards the close of market, which was matched with demand from local counterparties looking to reinvest at current market levels. Consequently, yields compressed by c.3bps on the average across the curve, with flows witnessed on the long-end (2034s & 2037s) maturities.

 

We expect the market to remain largely order-driven as most participants continue to stay on the side-lines awaiting good bargaining opportunities even as we approach the month’s end.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.92

14.09

0.04

14.50 15-Jul-21

15.35

15.28

(0.07)

16.39 27-Jan-22

14.82

14.44

(0.12)

14.20 14-Mar-24

15.28

15.05

(0.02)

12.50 22-Jan-26

15.68

15.56

0.07

16.29 17-Mar-27

15.70

15.64

(0.03)

13.98 23-Feb-28

15.82

15.79

(0.08)

12.15 18-Jul-34

15.75

15.61

(0.01)

12.40 18-Mar-36

15.61

15.47

(0.03)

16.2499 18-Apr-37

15.60

15.48

(0.06)

Source: Zedcrest Dealing Desk

 

Treasury Bills

Yields in the T-bills market compressed by c.4bps on the day as market players looked to invest excess liquidity in the secondary market due to the relatively low volume sold at today’s OMO auction.

The CBN floated an OMO auction today, offering a total of N500bn over three maturities. Following weak demand at the auction, with a c.44% bid to cover ratio, the Apex bank maintained stop rates selling a total of N199.61bn against maturities of N408.98bn. Stop rates closed at 11.50% for the 105-day, 13.00% for the 182-day and 14.50% for the 350-day maturities.

With current liquidity levels, the CBN is likely to float another auction to manage system liquidity. We expect market participants to remain active at the short-end of the curve as investors test the CBN’s resolve to maintain stop rates at subsequent OMO auctions.

 


OMO Auction Results

Tenor

Rate (%)

Offer (₦’bn)

Sub (₦'bn)

Sale (₦'bn)

105 day

11.50

50.00

0.13

0.13

182 day

13.00

150.00

17.35

16.35

350 day

14.50

250.00

207.82

183.13

 

Benchmark FGN Treasury Bills

 

Description

Bid (%)

Offer (%)

Day Change (%)

 

6-Dec-18

12.50

11.50

0.00

 

3-Jan-19

12.75

12.25

(0.25)

 

14-Feb-19

12.95

12.70

(0.10)

 

14-Mar-19

13.00

12.70

(0.05)

 

4-Apr-19

13.00

12.65

0.00

 

2-May-19

13.05

12.65

0.00

 

18-Jul-19

13.00

12.70

(0.40)

 

1-Aug-19

14.00

13.55

0.60

 

12-Sep-19

14.50

14.35

0.00

 

3-Oct-19

14.65

14.45

0.00

 

14-Nov-19

14.50

14.40

(0.25)

 

Source: Zedcrest Dealing Desk

 

Money Market

The OBB and OVN rates declined today as expected to close at 5.17% and 6.08% respectively due to inflows from OMO maturities of N408.98bn which further improved market liquidity.

System liquidity is estimated to close today at c.N553.80bn despite the sale of N199.61bn OMO T-bills by the CBN in a bid to manage the excess liquidity.

 

We expect rates to inch up slightly tomorrow in the light of funding pressures coming from the periodical   FX Retail intervention by the CBN.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

5.17

9.67

Overnight (O/N)

6.08

10.67

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged to close at N306.75/$ (spot) and N359.81/$ (SMIS). At the I&E FX window a total of $374.58bn was traded in 584 deals, with rates ranging between N350.00/$ - N365.00/$. The NAFEX closing rate appreciated by c.0.05% to N364.10/$ from N364.26/$ previously.

 

At the parallel market segment, the cash and transfer rates both remained unchanged to close N364.00/$ and N366.50/$ respectively.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.75

306.75

CBN SMIS

359.81

359.81

I&E FX Window

364.10

364.26

Cash Market

364.00

364.00

Transfer Market

366.50

366.50

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

Despite the U.S. Thanksgiving holiday, Emerging-market government debt remained weak with spreads widening to c.500bps above U.S. Treasuries, the most in two years. Yields of the NGERIA Sovereigns consequently expanded by c.2bps on the average across the curve. The longest trading paper (NGERIA 49) is now trading at a discount (98.00), 20bps higher than issue yield (9.25%), after just been one week old.  

 

We witnessed little activity across major NGERIA Corps tickers, with some repricing across select tickers. The Zenith 19s and 22s papers opened lower, with yields expanding by c.138bps and c.44bps on the day.

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

 

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