Renewed Bullish Sentiments Anticipated Following MPR Cut

Proshare

Wednesday, March 27, 2019 08:00AM / Zedcrest Capital


***CBN Switches Strategy, Cuts MPR by 50bps***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.31%

As at March 15, 2019. A c.6bps decline from 11.37% recorded in January 2019

MPR

13.50%

Cut by 50bps to 13.50% at the Mar. 26, 2019 MPC Meeting

External Reserves

$44.04bn

As at March 25, 2019. A c.0.71% increase from $43.73bn on March 22, 2019

Brent Crude

$67.13pb

As at March 26, 2019. A c.0.67% increase from $66.68pb on March 25, 2019

 

Macro

The Central Bank of Nigeria (CBN) at its Monetary Policy Committee (MPC) held at the banks’ headquarters in Abuja resolved to reduce the Monetary Policy Rate (MPR), by 50 basis points to 13.5 per cent from 14 per cent. The current reduction is coming after holding the MPR at 14% for 15 consecutive months since July 2016, when it was raised by 200 basis points to 14.0 percent. In its arguments, the Committee was convinced that a rate cut would further uphold the Bank’s commitment to promoting strong growth by way of encouraging credit flow to the productive sectors of the economy.

 

Bonds

The FGN Bond market traded on a quiet note, with slight demand witnessed on the 2028s towards the close of trading down to c.14.25%. Bids also strengthened on the 2023 bond, with yields closing relatively flat on the day due to slight uptick on the longer end of the curve.

 

The DMO will offer a total of N100bn of the 5, 7 and 10-yr maturities at an auction scheduled to hold tomorrow. We expect rates to trend lower as buying sentiments are expected to strengthen on the back of the 50bps cut in MPR by the CBN.

 


FGN Bond Auction Expectations

Tenor

Offer (N'bn)

Expected Stop Rate (%)

Apr 2023

40.00

14.00 - 14.30

Mar 2025

40.00

14.00 - 14.30

Feb 2028

20.00

14.00 - 14.30

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.62

14.31

0.05

16.39 27-Jan-22

14.52

14.24

(0.01)

12.75 27-Apr-23

14.47

14.35

(0.21)

14.20 14-Mar-24

14.50

14.24

0.00

13.53 23-Mar-25

14.50

14.40

(0.05)

12.50 22-Jan-26

14.52

14.31

0.02

16.29 17-Mar-27

14.50

14.31

0.02

13.98 23-Feb-28

14.38

14.26

0.05

12.15 18-Jul-34

14.43

14.25

0.04

12.40 18-Mar-36

14.42

14.14

0.10

16.2499 18-Apr-37

14.37

14.19

0.10

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market traded on a relatively flat note as buying interets were constrained by the relatively tight system liquidity levels. We consequently witnessed a slight uptick in yields on some mid and long tenor bills.

Barring a renewed OMO auction by the CBN, we expect rates to trend by c.20-30bps lower, as market players react to the MPR cut by the CBN.

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Apr-19

12.00

9.00

0.00

2-May-19

11.00

9.00

0.00

13-Jun-19

12.00

11.35

0.00

18-Jul-19

13.00

11.90

0.50

1-Aug-19

13.00

11.85

0.00

12-Sep-19

13.35

13.10

0.00

3-Oct-19

13.35

13.15

0.15

14-Nov-19

13.35

13.15

0.10

5-Dec-19

13.30

13.05

0.25

2-Jan-20

13.20

13.05

0.05

6-Feb-20

13.10

12.85

0.05

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates in the money market moderated slightly as banks were able to access the CBN’s SLF for their funding needs, while system liquidity improved to c.N80bn positive. The OBB and OVN rates consequently ended the session at 16.43% and 17.29% respectively.

We expect rates to remain elevated tomorrow, as there are no significant inflows anticipated. 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

16.43

22.43

Overnight (O/N)

17.29

24.43

Source: FMDQ, Zedcrest Research 

 

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (spot) and N355.78/$ (SMIS). The NAFEX closing rate in the I&E window appreciated further by 0.04% to N360.25/$, as market turnover rose by 37% to $307m. At the parallel market, the cash and transfer rates remained unchanged at N357.90/$ and N364.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

355.78

355.78

I&E FX Window

360.25

360.39

Cash Market

357.90

357.90

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereigns were slightly stronger in today’s session, with yields compressing by c.5bps on the day, following renewed interests mostly on the longer end of the curve.

 

In the NGERIA Corps, investor’s remained bearish on the ECOTRA, ACCESS and FBNNL 21s, whilst demand remained firm on the FIDBAN 22s and SEPLLN 23s.

 

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd. 

 

 

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