Resurgent Interests in EM Bolsters Nigerian Eurobonds to 6-Week High

Proshare

Friday, September 21, 2018    07:12 AM / Zedcrest Capital

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KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at September14, 2018,9bps up from 11.14% recorded in July 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$44.94bn

As atSeptember 19, 2018. A c.0.13% decrease from $45.00bnon Sept. 18, 2018

Brent Crude

$78.31pb

As at September20, 2018. A c.0.50% increasefrom$78.72pbon Sept. 19, 2018

 

 

Bonds

The bond market remained scantily traded, except for some client interests we witnessed mostly on the short and mid-tenured bonds. Yields compressed marginally by c.2bps, as the market remained relatively flat week to date.

 

We expect this trend to persist in the interim, whilst market players closely watch out for the US FOMC and Nigeria MPC meetings, and the FGN Bond auction which would hold in the coming week. Our sentiment remains slightly bearish, with the FOMC expected to hike rates for a third time this year; the  MPC though expected to hold rates might sound more hawkish, while we anticipate a further hike in the FGN bond auction rates, in tune with the recent developments in the secondary market.

 

 

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.43

13.79

0.03

14.50 15-Jul-21

15.17

15.10

(0.07)

16.39 27-Jan-22

15.01

14.69

0.01

14.20 14-Mar-24

15.10

14.96

(0.03)

12.50 22-Jan-26

15.20

15.08

(0.04)

16.29 17-Mar-27

15.18

15.09

(0.02)

13.98 23-Feb-28

15.24

15.14

(0.04)

12.15 18-Jul-34

15.40

15.28

(0.04)

12.40 18-Mar-36

15.40

15.30

0.01

16.2499 18-Apr-37

15.39

15.27

(0.01)

Source: Zedcrest Dealing Desk 

 

Treasury Bills

Yields in the T-bills market moderated further by c.30bps as market players continued to cherry-pick on attractive yields on the shorter end of the curve due to the significantly buoyant level of liquidity in the system.

 

Spreads tightened across the curve as the relatively high level of uncertainty in previous sessions ebbed, following an OMO auction by the CBN, where the PMA bills offered in the previous session were repeated, with demand mostly on the 364-day bill which cleared at 13.50% with a total sale of N306.55bn.

 

Barring a further OMO auction by the CBN, we expect yields to be relatively stable, due to the buoyant level of liquidity in the system. Market players are expected to prefer the longer end now above the short end of the curve.

 

 


OMO Auction Result

Tenor

Rate (%)

Offer (N’bn)

Sub (N'bn)

Sale (N'bn)

91 days

Nil

100.00

0.24

No Sale

182 days

12.50

150.00

38.05

31.05

364 days

13.50

300.00

383.39

306.55

Source: Zedcrest Research

 

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Oct-18

11.00

10.00

0.00

1-Nov-18

12.50

12.00

(0.55)

6-Dec-18

12.65

12.25

(0.35)

3-Jan-19

12.65

12.45

(0.35)

14-Feb-19

13.00

12.75

(0.20)

14-Mar-19

12.60

12.45

(0.45)

4-Apr-19

12.65

12.30

(0.60)

18-Jul-19

12.80

12.55

(0.50)

1-Aug-19

13.50

12.60

(0.15)

Source: Zedcrest Dealing Desk 

 

Money Market

The OBB and OVN rates remained relatively stable, closing today at 4.17% and 4.75% respectively, as inflows from OMO T-bill maturities (c.N218bn) helped offset outflows from today’ OMO auction sales (c.N337bn), consequently sustaining system liquidity at c.N560bn positive.

 

We expect rates to close the week on a calm note, barring a further OMO auction by the CBN.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

4.17

4.75

Overnight (O/N)

4.75

5.75

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank, the Naira/USDrate remained stable at N306.30/$ (spot) and N360.94/$ (SMIS).At the I&E FX window, a total of $401.69mn was traded in 386deals, with rates ranging between N358.00/$ - N365.00/$. The NAFEX closing rate depreciatedby c.0.08% to N363.27/$ from N362.97/$ previously.

 

At the parallel market, the cashrates depreciated by 30k to N359.70/$, while the transfer rate remained unchanged at N362.00/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.30

306.30

CBN SMIS

360.94

360.94

I&E FX Window

363.27

362.97

Cash Market

359.70

359.40

Transfer Market

362.00

362.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereignstraded on firmly bullish note in today’s session, following the resurgent interests across most EM assets.  Yields declined by c.13bps on average, with the most interests seen on the Nov 2047 bond which gained a whopping 2.00 percent on the day.

 

The NGERIA Corps were also slightly bullish, with interests seen on the ZENITH, UBANL and FIDBAN 22s. The top gainer was the FIDBAN 22s which gained about 0.50pct on the day.

 

 

 Proshare Nigeria Pvt. Ltd.

 

 Proshare Nigeria Pvt. Ltd.

 

 

Related News

1.       Average T-Bills Rate Rose 184bps WoW Amidst Buoyant System Liquidity

2.       Bond Yields Moderate Further Amid Tighter Supply

3.       Average T-bills Yield Rose Significantly by 208bps to Close the Week at 14.43%

4.       Markets Take a Breather as CBN Pauses on OMO

5.       Market Players Selloff Bills above 14% as CBN extends OMO offer to the 1-year

6.       Yield Curve Nears Inversion as DMO Clears 1-Year Bill at 15.60% eff. Yield

7.       Market Players Risk off T-bills, as CBN Elongates OMO Tenor above the 300day Mark

8.       Ahead of Next T-bills Auction Scheduled for 12th Sept, 2018

9.       Market Players Demand Higher Rates for OMO, as PMA Approaches

10.   CBN Raises OMO Stop Rates, Succumbs to Investor Pressure PMA Holds this Wednesday

11.   Average T-Bills Yield Rose by 15bps to Close the Week at 12.36%

 

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