Nigerian Eurobonds Turn Bearish Ahead of US FOMC Decision

Proshare

Wednesday, January 30, 2019   08:00 AM / Zedcrest Capital

***House Okays N30,000 as New Minimum Wage***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.44%

As at January 16, 2019. A c.16bps increase from 11.28% recorded in November 2018

MPR

14.00%

Left Unchanged for the 13th Consecutive Time at the Jan. 22, 2019 MPC Meeting

External Reserves

$43.17bn

As at January 28, 2019. A c.0.01% decrease from $43.13bn on January 25, 2019

Brent Crude

$61.36pb

As at January 29, 2019. A c.0.12% increase from $60.67pb on January 28, 2018

 

Bonds

The Bond market traded on a relatively quiet note, as market players looked ahead to the Bond auction scheduled to hold tomorrow. Yields however maintained a slight downtrend, underscoring the relatively strong demand for bonds in recent sessions.

 

The DMO will auction N50bn each of the 2023, 2025 and 2028 bonds at the auction tomorrow. We expect stop rates to clear c.10 - 30bps below previous levels, with the most demand expected on the 10-year bond.

 

FGN Bond Auction Expectation

Maturity

Offer (N'bn)

Expected Stop Rate (%)

Previous Stop Rate (%)

APR 2023

50.00

14.90 - 15.20

15.25

MAR 2025

50.00

15.00 - 15.30

15.50

FEB 2028

50.00

15.15 - 15.45

15.50

Source: Zedcrest Research

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.19

14.50

(0.01)

14.50 15-Jul-21

15.39

15.22

(0.11)

16.39 27-Jan-22

15.06

14.69

(0.02)

14.20 14-Mar-24

14.96

14.72

(0.03)

12.50 22-Jan-26

15.26

14.95

(0.07)

16.29 17-Mar-27

15.16

14.99

(0.02)

13.98 23-Feb-28

15.36

15.25

(0.05)

12.15 18-Jul-34

15.30

15.06

0.00

12.40 18-Mar-36

15.22

15.12

(0.03)

16.2499 18-Apr-37

15.16

15.00

0.06

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market traded on a slightly bullish note, with some buying interests observed mostly on the short end of the curve (Feb – April), due to improved system liquidity from FAAC Inflows. The CBN however sold c.N77bn OMO bills to mop up excess liquidity from the previous session.

The CBN on behalf of the FG will offer c.N225bn NTBs at an auction tomorrow. We do not anticipate any significant change in stop rates from previous levels. We also expect bullish sentiments to persist in the secondary market, on the back of the significantly robust system liquidity levels.

NTB Auction Expectations

Tenor

Offer (N'bn)

Expected Rate (%)

Previous Rate (%)

91 days

7.85

11.00 - 11.30

11.00

182 days

69.57

13.20 - 13.50

13.10

364 days

177.22

14.80 - 15.10

15.00

Source: Zedcrest Research

 

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Feb-19

13.45

12.45

(0.05)

14-Mar-19

13.50

12.45

0.45

4-Apr-19

13.50

12.50

0.05

2-May-19

11.90

11.55

(0.25)

13-Jun-19

13.00

12.45

0.00

18-Jul-19

13.50

12.50

(0.05)

1-Aug-19

13.70

13.40

(0.05)

12-Sep-19

14.50

14.20

(0.05)

3-Oct-19

14.85

14.60

(0.05)

14-Nov-19

15.00

14.80

0.00

5-Dec-19

15.00

14.80

(0.05)

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates in the money market declined sharply by c.6pct, as inflows from FAAC payment (c.N310bn) boosted system liquidity to c.N290bn from c.N60bn opening the day. The OBB and OVN rates consequently closed the session at 10.17% and 10.83% respectively.

We expect funding rates to moderate further tomorrow, as there are no significant funding pressures expected.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

10.17

16.07

Overnight (O/N)

10.83

17.31

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.75/$ (spot) and N357.97/$ (SMIS). The NAFEX rate in the I&E window depreciated by c.0.16% to N363.34/$. At the parallel market, cash rates depreciated by c.0.11% to N360.20/$, while transfer rates remained unchanged at N365.50/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.75

306.75

CBN SMIS

357.97

357.97

I&E FX Window

363.34

362.75

Cash Market

360.20

359.80

Transfer Market

365.50

365.50

Source: CBN, FMDQ, REXEL BDC

 

 

 

Eurobonds

The NGERIA Sovereigns turned bearish in today’s session, as market players became slightly risk off, ahead of the US FOMC meeting scheduled for tomorrow. Yields consequently reracked higher by c.11bps across the curve.  

 

The NGERIA Corps were relatively quiet, with bids weaker on the DIAMBK 19s. We however witnessed slight interests on the ACCESS 21s Sub.



Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.

 

 

 

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