New Nigeria Eurobond Issues Trade to Discount despite Early Rally

Proshare

Thursday, November 15, 2018/ 08:05PM / Zedcrest Capital

***Nigeria cannot attain 40bn barrels oil reserve*** - NAPE

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

$41.64bn

As at November 14, 2018. A c.0.07% decrease from $41.67bn on November 13, 2018

Brent Crude

$67.05pb

As at November 15, 2018. A c.0.45% decrease from $66.75pb on November 14, 2018

 

 

Bonds

The bond market remained relatively stable in today’s session, with yields compressing marginally by c.3bps following slight interest still mostly on the 2034s. The slight pullback in yields is reckoned to be majorly a consolidation due to bargain interests on some previously sold off maturities.

 

Our expectations are for a renewed uptrend in yields in the coming week on the back of expectations for higher inflation and renewed supply of bonds at the forthcoming FGN auction. Though the CBN is expected to hold rates at its MPC next week, we expect a more hawkish statement with a preference for hiking due to election uncertainties.  

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.93

14.20

0.01

14.50 15-Jul-21

15.37

15.18

(0.02)

16.39 27-Jan-22

15.00

14.55

(0.10)

14.20 14-Mar-24

15.24

15.11

(0.01)

12.50 22-Jan-26

15.66

15.47

(0.03)

16.29 17-Mar-27

15.68

15.51

0.02

13.98 23-Feb-28

15.92

15.80

(0.04)

12.15 18-Jul-34

15.82

15.65

(0.11)

12.40 18-Mar-36

15.64

15.51

(0.01)

16.2499 18-Apr-37

15.60

15.50

0.01

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market remained relatively flat except for slight interests on some short tenors. This was as market players shifted focus to the OMO auction by the CBN which recorded a total sale of c.453bn of the N450bn offered and the c.N423bn that matured. The most interests remained on the longest tenor (c.406bn), while rates were unchanged at 11.50%, 13.00% and 14.50% on the 77, 182 and 364-day bills offered.

 

We expect yields to close the week on a relatively calm note, as demand pressures are expected to have been calmed by the significant OMO sale by the CBN today.

 


OMO Auction Result  - 15 November 2018

Tenor

Rate (%)

Offer (N’bn)

Sub (N'bn)

Sale (N'bn)

77 day

11.50

50.00

0.06

0.06

182 day

13.00

100.00

47.04

47.04

364 day

14.50

300.00

420.92

405.92

Source: CBN

 

Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

6-Dec-18

12.60

11.40

0.10

3-Jan-19

13.00

12.70

0.00

14-Feb-19

13.20

12.95

0.20

14-Mar-19

13.25

12.85

0.00

4-Apr-19

13.00

12.45

0.00

18-Jul-19

13.00

12.70

0.00

1-Aug-19

13.65

13.45

0.00

12-Sep-19

14.65

14.35

0.15

3-Oct-19

14.65

14.30

0.15

Source: Zedcrest Dealing Desk

 

 

Money Market

The OBB and OVN rates inched slightly higher to close the day at 6.67% and 7.73% respectively, with system liquidity estimated to have dipped slightly to c.N247bn, following the net outflow of c.N30bn from the CBN’s OMO sale today.

 

We expect rates to close the week on a relatively calm note, as there are no significant outflows expected tomorrow.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

6.67

5.75

Overnight (O/N)

7.33

6.42

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.70/$ (spot) and N360.85/$ (SMIS). At the I&E FX window a total of $179.10mn was traded in 444 deals, with rates ranging between N350.00/$ - N365.10/$. The NAFEX closing rate appreciated by c.0.09% to N363.90/$ from N364.24/$ previously.

 

At the parallel market segment, the cash and transfer rates depreciated by N1.00 to N362.80/$ and N365.50/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.70

306.70

CBN SMIS

360.85

360.85

I&E FX Window

363.90

364.24

Cash Market

362.80

361.80

Transfer Market

365.50

364.50

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

In the NGERIA Sovereigns we saw profit takers on the new issues, following a slight rally early in the day. We also witnessed some selloffs mostly on the Feb 2032, as market players adjusted to yield levels on the new issues. Yields were marginally higher across aboard and we now have a new curve!

 

In the NGERIA Corps, we saw interests mostly on the DIAMBK 19s and ACCESS 21s Sub.

 

 Proshare Nigeria Pvt. Ltd.

 

 Proshare Nigeria Pvt. Ltd.

 

 

 

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