Renewed Investors’ Interests Drive Recovery in Nigerian Eurobonds

Proshare

Monday, July 09, 2018 /07:20 PM / Zedcrest Capital

***Nigeria’s 2018 Capital Budget Unrealisable *** - Moody’s

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

$47.80billion

Rose by 0.36% as at 3 July from $47.63bn as at 13 June 2018

Brent Crude

$77.85pb

Rose by 1.04% from $77.04pb on 5 July 2018

 

 

Bonds

The Bond market opened relatively quiet, but turned firmly bullish as market players began cherry-picking on the higher yielding bills on the longer end of the curve. We witnessed the most demand on the 2036s which was significantly sold off in the previous week. Yields consequently compressed by c.14bps on average. We expect yields to still trend slightly lower in the coming days given the general expectation for a further downtrend in inflation result to be released Friday. We do not however expect this bullish trend to be sustained for long, with some offshore accounts eyeing target exit levels at sub 14%. The Q3 FGN Bond auction calendar to be released any time from now, would also play a major role in shaping market sentiments. We do not think this will be bullish.

 

FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.32

12.87

(0.04)

14.50 15-Jul-21

13.76

13.36

(0.19)

16.39 27-Jan-22

13.57

13.19

(0.23)

14.20 14-Mar-24

13.80

13.41

(0.06)

12.50 22-Jan-26

14.00

13.72

(0.16)

16.29 17-Mar-27

14.03

13.79

(0.06)

13.98 23-Feb-28

14.11

14.02

(0.14)

12.15 18-Jul-34

14.17

14.01

(0.12)

12.40 18-Mar-36

14.22

14.10

(0.18)

16.2499 18-Apr-37

14.08

13.86

(0.19)

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market traded on a slightly bullish note, with yields compressing by c.6bps on average.  We however witnessed slight sell on some Sep –Dec maturities, as some market players looked to free up some liquidity for funding of their wholesale FX bids. We expect yields to be relatively flat tomorrow, as system liquidity has been relatively tightened by the Wholesale and Retail FX sales in the past two sessions.

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

2-Aug-18

12.00

11.00

(0.10)

13-Sep-18

12.00

11.75

0.10

4-Oct-18

11.00

10.50

0.05

1-Nov-18

11.80

11.60

(0.25)

6-Dec-18

12.05

11.90

(0.10)

3-Jan-19

12.05

11.90

0.00

14-Feb-19

11.90

11.80

(0.10)

14-Mar-19

12.20

11.30

(0.10)

4-Apr-19

12.00

11.00

(0.05)

Source: Zedcrest Dealing Desk

 

Money Market

The OBB and OVN rates trended significantly higher by c.10pct to 20.83% and 23.79% respectively. This came as banks were required to fund for their wholesale FX bids (c.N90bn) by the CBN.  System Liquidity is consequently estimated to decline further to c.N100bn positive, from c.N200bn estimated in the previous session. We expect rates to remain relatively stable tomorrow, as there are no significant funding pressures expected.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

20.83

11.33

Overnight (O/N)

23.79

12.92

Source: FMDQ, Zedcrest Research 

 

FX Market

The Interbank rate depreciated by 0.02% to N305.75/$ from its previous rate of N305.70/$. The NAFEX rate however appreciated by 0.16% to N362.00/$. In the parallel market, cash rates appreciated further by 20k to N358.80/$, while the transfer market rate remained stable at N363.50/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.75

305.70

CBN SMIS

330.00

330.00

I&E FX Window

362.00

362.58

Cash Market

358.80

359.00

Transfer Market

363.50

363.50

Source: CBN, FMDQ, REXEL BDC 

 

Eurobonds:

The NGERIA Sovereigns remained firmly bullish, with yields declining further by c.14bps on average. This is coming on the back of renewed investors’ interests on the NGERIA SOVs which have now recovered by more than 5% from their YTD lows in the month of June.

 

The NGERIA Corps also posted decent gains with slight buying interests witnessed across most of the traded tickers.  We witnessed the most demand on the shorter dated tickers; Zenith 19s, DIAMBK 19s and Access 21s sub.

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.



 

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