Robust Demand Sees Significant Drop in T-bills Yields at The PMA

Proshare

Thursday, March 14, 2019 06:19 AM / Zedcrest Capital


KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.37%

As at February 15, 2019. A c.7bps decline from 11.44% recorded in December 2018

MPR

14.00%

Left Unchanged for the 15thConsecutive Time at the Jan. 22, 2019 MPC Meeting

External Reserves

$42.87bn

As at March 12, 2019. A c.0.12% increase from $42.82bn on March 11, 2019

Brent Crude

$67.33pb

As at March 13, 2019. A c.0.28% increase from $67.14pb on March 12, 2019

 

Bonds

The FGN Bond Market witnessed renewed interest from investors across the curve, even as little volume was traded during today’s session. Demand was notable at the mid-end (2027s) & long-end (2037s), as yields dropped lower by c.9bps on the average across the curve.

 

We expect demand for bond yields to persist from local fixed income investors, as once-attractive yields from Fed- Govt. T-bills continue to decline.

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.65

14.29

(0.06)

16.39 27-Jan-22

14.59

14.31

(0.06)

12.75 27-Apr-23

14.44

14.30

(0.22)

14.20 14-Mar-24

14.42

14.01

(0.04)

13.53 23-Mar-25

14.57

14.31

(0.02)

12.50 22-Jan-26

14.44

14.26

0.00

16.29 17-Mar-27

14.36

14.27

(0.17)

13.98 23-Feb-28

14.33

14.26

0.00

12.15 18-Jul-34

14.25

14.08

(0.14)

12.40 18-Mar-36

14.25

14.16

(0.18)

16.2499 18-Apr-37

14.20

14.13

(0.14)

Source: Zedcrest Dealing Desk

 

Treasury Bills

Anticipation for lower stop rates at the Primary Market Auction led a bullish trading session in the T-bills market, as yields dropped by c.29bps on the average across the NTB curve. Demand was evident on the longer end of the curve, as bids improved across the Feb2020 maturities.

At the PMA, robust demand for yields saw stop rates close much lower that the previous auction. The DMO sold a total of c.N90bn across 3 tenors, with demand skewed towards the 364-days with a bid-to-cover ration of 7.65X. Stop rates for the 91-, 182- & 364-day tenors consequently closed lower at 10.75% (-15bps), 12.50% (-51bps) and 12.845% (-152bps) respectively.

We expect the bullish run to continue opening tomorrow as flows from unmet demand flow into the secondary market and an expected OMO auction from the CBN to mop up excess liquidity from corresponding maturities.

NTB Auction Results

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

91 days

10.75

5.00

14.36

5.00

182 days

12.50

14.00

46.47

14.00

364 days

12.845

70.50

539.69

70.50

Source: Zedcrest Research

 


Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Apr-19

12.50

9.00

0.00

2-May-19

11.50

10.00

(0.50)

13-Jun-19

11.60

11.00

(0.30)

18-Jul-19

12.70

11.96

(0.30)

1-Aug-19

12.20

11.96

(0.80)

12-Sep-19

13.30

13.20

(0.10)

3-Oct-19

13.35

13.26

(0.20)

14-Nov-19

13.40

13.20

(0.15)

5-Dec-19

13.35

13.10

(0.15)

2-Jan-20

13.00

12.80

(0.40)

6-Feb-20

12.95

12.70

(0.35)

Source: Zedcrest Dealing Desk

 

Money Market

System liquidity remained stable at c.N185bn, even as the CBN held off floating an OMO auctions. Rates in the money market consequently dropped lower to 9.42% and 10.00% for OBB and OVN respectively.

We expect rates to drop further opening tomorrow as OMO maturities ease up system liquidity levels. The CBN is expected to float an OMO auction to manage excess liquidity.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

9.42

9.67

Overnight (O/N)

10.00

10.33

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (Spot) and N356.92/$ (SMIS). The NAFEX closing rate in the I&E window however strengthened by N0.15k to close at N360.29/$, while the cash rate and transfer rates at the parallel market remained unchanged at N358.00/$ and N365.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.95

306.95

CBN SMIS

356.92

356.92

I&E FX Window

360.29

360.44

Cash Market

358.00

358.00

Transfer Market

365.00

365.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns halted previous gains as investors took profits across the curve. Despite stable oil prices at $67.33pb, yields closed higher by c.3bps on average.

 

Trading activities were mixed in the NGERIA Corps, demand witnessed on ACCESS 21 Subs and FBNNL 21s while investors sold off DIAMBK 19s and ZENITH 19s.

 

 

 

Proshare Nigeria Pvt. Ltd.

 

 

Proshare Nigeria Pvt. Ltd.

 

 

Related News

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3.      Increased OMO Mop-Ups by CBN Drive T-Bills Average Yield up to 13.5% as PMA Holds this Wednesday

4.      Money Market Rate Decreased As Overnight Rate Fell To 10.08%

5.      Monthly Fixed Income Review For February 2019

6.      T-Bill Yields Trend Lower as CBN Holds off on Long Tenor OMO Offer

7.      Fixed Income Monthly Update February 2019 - Lower Yields To Take Center Stage

8.     Bond Yields Tick Higher as Demand Interests Wane

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10.  NSE Enhances Capacity of Dealing Members On Fixed Income Trading

11.   Investors Panic as CBN Cuts off Long Tenor OMO Offering


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