PMA Rates Trend lower as Market Players Oversubscribe the 1-yr bill by 175%

Proshare

Wednesday, August 1, 2018 /10:00PM / Zedcrest Capital

*** Fed holds interest rates, says economy is growing at a 'strong' pace***

 

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at July 23, 2018, 38bps down from 11.61% recorded in May 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$47.16bn

As at July 30, 2018. A c.0.21% decrease from $47.26bn as at July 27, 2018.

Brent Crude

$72.57pb

As at August 1, 2018. A c.2.88% decrease from $74.72pb as at July 31, 2018

 

 

Bonds

The Bond market opened the month on a relatively quiet note, with yields compressing by c.3bps on average, following slight demand on the longer end of the curve (36s and 37s). On the mid-end of the curve, we witnessed slight profit taking on the 2027s, as market players showed preference for the higher yielding 2028s.

 

We expect the market to remain largely order-driven in the interim, with interests expected to remain largely focused on the relatively higher yielding bonds.

 

 

FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.26

12.82

0.00

14.50 15-Jul-21

13.60

13.31

0.00

16.39 27-Jan-22

13.67

13.29

(0.01)

14.20 14-Mar-24

13.86

13.54

0.00

12.50 22-Jan-26

14.11

14.02

0.01

16.29 17-Mar-27

13.98

13.92

0.02

13.98 23-Feb-28

14.28

14.23

(0.02)

12.15 18-Jul-34

14.18

14.05

0.02

12.40 18-Mar-36

14.17

14.12

(0.02)

16.2499 18-Apr-37

14.12

14.05

(0.03)

Source: Zedcrest Dealing Desk

 

Treasury Bills

The T-bills market opened the month on a relatively quiet note, as market players shifted focus to the T-bills Primary Market Auction. Bids at the Auction were relatively more aggressive, with significant demand from market players especially on the 1-year bill which was oversubscribed by 175%.

The DMO consequently rolled over the total amount of maturing T-bills at slightly lower rates; -10bps and -19bs on the 182- and 364-day bills, while the 91-day bill remained unchanged from previous levels. The stop rates for the 91-, 182- and 364-day bills cleared at 10.00%, 10.40% and 11.30% respectively.

We expect the T-bills market to trade on a relatively quiet note tomorrow, as the CBN is expected to float an OMO auction to counter inflows from c.N324bn maturing OMO bills. We however expect slight bullish sentiments on the longer tenured bills from market players looking to cover some of their lost auction bids.

 

Primary Market Auction Results (1 August 2018)

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

91 days

10.00

9.54

9.63

9.54

182 days

10.40

69.56

69.64

69.56

364 days

11.30

136.52

238.70

136.52

 

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

13-Sep-18

11.25

10.75

(0.05)

4-Oct-18

10.25

9.75

(0.10)

1-Nov-18

10.75

10.55

0.00

6-Dec-18

12.00

11.80

(0.10)

3-Jan-19

12.00

11.80

(0.05)

14-Feb-19

12.08

12.00

(0.02)

14-Mar-19

12.15

11.00

0.00

4-Apr-19

12.10

11.00

0.00

18-Jul-19

11.35

11.10

(0.05)

Source: Zedcrest Dealing Desk

  

 

Money Market

Buoyant system liquidity via FAAC inflows of c.N360bn pushed interest rates down, as the Open Buy-Back (OBB) and Overnight (O/N) rates closed at 2.92% and 3.75% respectively. System liquidity which rose significantly higher to c.N496bn at the open of the day is estimated to remain relatively unchanged, as there were no significant outflows from the system.

 

We expect rates to remain relatively stable tomorrow, as the CBN is expected to float an OMO auction to manage the excess inflows from expected OMO T-bill maturities.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

              2.92        

8.58

Overnight (O/N)

3.75

9.58

Source: FMDQ, Zedcrest Research

 

FX Market

The Naira remained stable at the interbank market, closing at N305.90/$. It however appreciated slightly at the I&E FX window, closing at N362.33/$ (c.0.12% stronger from N362.40/$ previously).  At the parallel market, the USD transfer rate appreciated by 50k, closing at N361.00/$ (0.15% up from N361.50/$ previously) while the cash rate traded flat at N358.40/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.90

305.90

CBN SMIS

330.00

330.00

I&E FX Window

362.33

362.40

Cash Market

358.40

358.40

Transfer Market

361.00

361.50

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns opened the new month continuing the bearish trend from the previous trading session, as yields inched up by an average of c.13bps across the curve. This came as some market players opted to cut down on risk in anticipation of the FOMC interest rate decision.

 

The FED kept rates unchanged as was widely anticipated, whilst also noting the strong growth in the US economy. The uptick in the US 10-year yield consequently thinned out at c.3.00%.  

 

Activities in the NGERIA Corps space slowed a bit, as some tickers reversed previous gains. Pockets of demand were however witnessed on some select tickers, such as the ACCESS 21s and SEPLLN 23s.


Proshare Nigeria Pvt. Ltd.

 

 

 Related News

1.       Funding Rates expected to Trend Lower as c.N375bn FAAC Inflows hit the System

2.       Nigeria’s Debt Composition is Now External 30% Domestic 70%- Pat Oniha, DG DMO

3.       Liquidity Levels May Drive Rates Southwards Amid PMA This Week

4.       Fixed Income Market Monitor- Overnight Rate (OVN) Fell to 7.25% as at Last Week

5.       Bond Yields Compress following Demand on the Bond Yields

6.       DMO Publishes 2017 Debt Sustainability Analysis

7.       DMO Raises N66.9bn at the July 2018 FGN Bond Auction

8.       Bond Yields Trend Higher as Market players Cut losses on the 10-Yr

9.       Bond Yields Expected to Tick Higher following Weak Auction Results

10.   Key Message On 8.25% US$300m FBN Finance Co BV Subordinated Callable Note Due 2020

11.   Nigeria’s MPC retains benchmark rates, leans toward tighter policy

12.   Average T-Bills Rates Settle At 11.4% as June Inflation Prints At 11.2% Ahead Of MPC Meeting

13.   June 2018 Inflation figure posts at 11.23%, markets shrug in reaction

 

READ MORE:
Related News
SCROLL TO TOP