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Profit Takers Sustain Bond Yields at 13.50%

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Friday, December 15, 2017 8:00AM / @ZedcrestCapital 

*** FG to issue N10.69b Green Bond***
 

KEY INDICATORS

Inflation

15.91%

Declined by 0.07% in October from 15.98% in September 2017

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting of November 2017

External Reserves

$36.43billion

Accreted 1.94% as at 11th December from $36.01 as at 8th December 2017

Brent Crude

$62.64pb

Fell by 1.40% from $63.53pb on 14th December 2017


Bonds

The Bond market opened today on a significantly bullish note, following the significant oversubscription at the bond auction of the previous day. The market however turned weaker due to profit taking by market players who had pre-auction bond positions at very attractive levels. Market activity was focused more on the 2021, 2027 and 2037 bonds, as their yields rose by c.39bs from their opening market lows of 12.97 % (2021s), 13.00% (2027s) and 13.05% (2037s), to close at 13.32%, 13.40% and 13.46% respectively. Average bond yields however fell by 17bps to close at 13.49%, from its previous day level of 13.66%. We expect a slight compression in yields tomorrow, as we maintain our bullish bias on bonds at current levels. 

Table 1: Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

13.53

13.46

0.06

15.54 13-Feb-20

13.52

13.45

(0.09)

14.50 15-Jul-21

13.32

13.25

(0.44)

16.39 27-Jan-22

13.53

13.46

(0.19)

14.20 14-Mar-24

13.54

13.47

(0.07)

12.50 22-Jan-26

13.58

13.51

(0.29)

16.29 17-Mar-27

13.30

13.23

(0.34)

12.15 18-Jul-34

13.52

13.45

(0.16)

12.40 18-Mar-36

13.59

13.52

(0.03)

16.25 18-Apr-37

13.45

13.38

(0.14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Source: Zedcrest Dealing Desk  

Treasury Bills
The T-bills market was scantily traded in today’s session, despite the significant inflows from OMO and NTB maturities. This was as market players remained cautious on the sustainability of rates at current levels, coupled with some profit taking by local and offshore clients. We witnessed most trades on the short and medium end of the curve (Jan - Jun), with the bulk of trades consummated between 10% - 12% levels. Average T-bills yields however declined by 45bps to close today at 13.81%. We expect a further decline in yields tomorrow due to the sizeable liquidity in the market.

 

Table 2: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

4-Jan-18

12.20

11.95

(0.80)

1-Feb-18

13.00

12.75

(1.00)

1-Mar-18

11.50

11.25

(0.50)

5-Apr-18

13.25

13.00

(0.25)

3-May-18

13.50

13.25

0.00

14-Jun-18

13.25

13.00

(0.25)

5-Jul-18

12.50

12.25

(0.60)

2-Aug-18

13.00

12.75

0.00

20-Sep-18

12.50

12.25

0.00

4-Oct-18

12.30

12.05

0.00

1-Nov-18

12.45

12.20

0.00

Source: Zedcrest Dealing Desk  

Money Market

The OBB and OVN rates declined further today to close at 1.42% and 1.88%, as market liquidity was significantly bolstered by inflows from OMO (N209bn) and PMA (N131bn) maturities. System liquidity is consequently estimated to close at N780bn long, from a positive opening figure of N440bn. We expect rates to close slightly higher tomorrow, due to expected outflows for bond auction settlement and retail FX funding by banks. 

Table 3: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

1.42

2.50

Overnight (O/N)

1.88

3.00

Source: FMDQ, Zedcrest Research 

FX Market

The CBN Official spot rate appreciated slightly by 0.02% to N306.25/$, from its previous day rate of N306.30/$. Rates at the Investors and exporters FX window depreciated by 25k to close at N360.66/$. Rates at the parallel market however stayed flat at N362.00/$.

Table 4: FX Rates

 

Current (N/$)

Previous (N/$)

CBN Spot

306.25

306.30

CBN SMIS

330.00

330.00

I&E FX Window

360.66

360.41

Parallel Market

362.00

362.00

Source: CBN, FMDQ, REXEL BDC 

For more details email research@zedcrestcapital.com or call the dealing desk via 01-6311667 
  

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