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Offshore Selloff Drives FGN Bond Yields Closer to 14%

Proshare

Thursday, June 21, 2018 / 06:40 PM / Zedcrest Capital

***Buhari signs 2018 budget, kicks as lawmakers inject 6,403 projects***
 

KEY INDICATORS

Inflation

11.61%

Declined by 0.87% in May from 12.48% in April 2018

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting 0n 4 April 2018

External Reserves

$47.63billion

Rose by 0.42% as at 13 June from $47.43bn as at 7 June 2018

Brent Crude

$75.18pb

Rose by 0.13% from $75.08pb on 19 June 2018

 

 

Bonds

Bond yields rose significantly higher by c.20bps, largely driven by offshore selloffs especially on the 2026 and 2037 bonds. We expect the long end of the curve to remain pressured as market players remain significantly risk off on the longer duration bonds. Barring continued offshore selloff, we expect renewed buying interests from local clients on the medium tenured bonds at c.13.50 – 13.70% levels.

 


FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

12.76

12.23

0.62

15.54 13-Feb-20

12.93

12.80

0.03

14.50 15-Jul-21

13.87

13.43

0.33

16.39 27-Jan-22

13.82

13.22

0.32

14.20 14-Mar-24

13.78

13.29

0.40

12.50 22-Jan-26

14.00

13.57

0.43

16.29 17-Mar-27

13.77

13.51

0.26

13.98 23-Feb-28

13.82

13.35

0.26

12.15 18-Jul-34

13.96

13.58

0.26

12.40 18-Mar-36

13.98

13.65

0.26

16.2499 18-Apr-37

13.93

13.83

0.24

Source: Zedcrest Dealing Desk

 
 

Treasury Bills

The T-bills market traded on a relatively flat note, with yields ticking slightly higher by c.3bps on average. We witnessed relatively weaker subscriptions at the NTB PMA Auction today, which we presume was mostly filled from non-competitive client orders, as market players remain relatively unattracted by the lower PMA rates. The auction stop rates however printed marginally lower  by c.20bps on the 91 and 182-day bills, while the 364-day remained unchanged at  11.50% after being undersubscribed by c.N27bn. We expect yields to trend slightly lower tomorrow, as market players look to re-invest c.N377bn Maturing OMO bills.

 

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

5-Jul-18

12.00

10.50

0.00

2-Aug-18

13.00

12.00

0.00

13-Sep-18

12.50

12.00

0.00

4-Oct-18

12.30

11.90

0.00

1-Nov-18

12.60

12.00

0.00

6-Dec-18

12.20

11.90

0.00

3-Jan-19

12.25

12.00

0.00

14-Feb-19

12.30

10.00

0.00

14-Mar-19

12.30

10.00

0.00

4-Apr-19

12.30

10.00

0.00

Source: Zedcrest Dealing Desk

 

 

Money Market

The OBB and OVN rates rose higher to 12.50% and 14.25%, with system liquidity published lower at c.N200bn from c.N500bn previously. We expect rates to trend slightly lower tomorrow due to the expected inflows from OMO T-bill maturities. We however expect this to be moderated by a further OMO auction by the CBN.

 


Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

12.50

9.83

Overnight (O/N)

14.25

10.75

Source: FMDQ, Zedcrest Research

 

 FX Market

The Interbank rate remained stable at its previous rate of N305.85/$. The I&E FX rate appreciated slightly by 0.02% to N361.18/$. In the parallel market, cash rates remained stable at N360.00/$, while the transfer market rate appreciated slightly by 20k to N364.30/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.85

305.85

CBN SMIS

330.00

330.00

I&E FX Window

361.18

361.25

Cash Market

360.00

360.00

Transfer Market

364.30

364.50

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds:

The NGERIA Sovereigns recovered slightly from the intense selloff witnessed in the previous session. Yields retraced by c.20bps, having risen by as much as 60bps in the previous session. The 2047s were the most lifted, and are now at c.8.50%, having traded as high as c.8.70% in the previous session

 

We also witnessed slight recoveries in the NGERIA Corps, with the most buying interests seen on the ACCESS 21s snr, Zenith 22s and FIDBAN 22s. We however witnessed significant selloffs on the FBNNL 20s and slight sell on the DIAMBK 19s, ECOTRA 21s and SEPLLN 23s.



Proshare Nigeria Pvt. Ltd.


 

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