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Strong decline in T-Bill Yields as CBN stays silent on OMO

Proshare

Wednesday, December 6, 2017 6:00PM / @ZedcrestCapital 

*** External Reserves hit four-year High of $38.2bn***
 

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

$38.20billion

Accreted 9.71% as at 5th November from $34.82bn on 29th November 2017

Brent Crude

$61.87pb

Fell by 1.07% from $62.53pb on 5th December 2017


Bonds

The bond market opened on a relatively quiet note, but later turned bullish as traders began to react to the downward movement of yields in the T-bills space. We witnessed the most interest on the 10-yr bonds which declined by c.6bps to 14.72%. Average bond yields consequently declined by another 10bps to close today at 14.51%. We expect some more client demand to take yields slightly lower tomorrow.  

Table 1: Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

14.54

14.47

(0.25)

15.54 13-Feb-20

14.49

14.42

(0.11)

14.50 15-Jul-21

14.70

14.63

(0.12)

16.39 27-Jan-22

14.27

14.20

(0.05)

14.20 14-Mar-24

14.63

14.56

(0.10)

12.50 22-Jan-26

14.64

14.57

(0.09)

16.29 17-Mar-27

14.72

14.65

(0.06)

12.15 18-Jul-34

14.38

14.31

(0.07)

12.40 18-Mar-36

14.32

14.25

(0.11)

16.25 18-Apr-37

14.40

14.33

(0.02)

 

 

 

 

 

 

 

 

 

 

 

 

 


Source: Zedcrest Dealing Desk
  

Treasury Bills
The T-bills market traded on a significantly bullish note, due to the absence of an OMO auction by the CBN for the third consecutive day. Market players reacted to this development with renewed demand for T-bills across the curve. Average T-bill yields consequently declined by c.70bps to 16.81%. We expect this trend to persist, barring a resumption of OMO T-bill sales by the CBN. 

Table 2: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

4-Jan-18

16.00

15.75

(0.40)

1-Feb-18

16.50

16.25

(0.40)

1-Mar-18

14.00

13.75

(1.00)

5-Apr-18

15.60

15.35

(1.20)

3-May-18

16.25

16.00

(0.75)

14-Jun-18

15.75

15.50

(0.95)

5-Jul-18

15.80

15.55

(0.70)

2-Aug-18

15.50

15.25

(1.25)

20-Sep-18

15.00

14.75

(0.30)

4-Oct-18

15.00

14.75

(0.25)

1-Nov-18

15.00

14.75

(0.45)

Source: Zedcrest Dealing Desk  

Money Market
The OBB and OVN rates declined slightly to 13.83% and 14.83%, as system liquidity was bolstered by inflows from the FG’s Paris club refunds to States. We expect rates to crash to single digit levels tomorrow, on the backdrop of expected inflows from OMO T-bill maturities (N89.52bn), and expected FAAC disbursements to State and Local Govts. This is however barring a resumption of OMO T-bill sales by the CBN. 

Table 3: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

13.83

16.00

Overnight (O/N)

14.83

16.75

Source: FMDQ, Zedcrest Research  

FX Market

The CBN Official spot rate appreciated by 0.11% to N306.50/$ from N306.85/$ recorded in the previous session. The CBN’s external reserves is also estimated to have improved significantly by 9.71% to a four-year high of $38.2bn on the backdrop of the $3bn successful Eurobond issuance by the FG. 

Rates at the Investors and exporters FX window closed at N360.93/$ from N360.50/$ in the previous session. Rates at the parallel market however stayed flat at N361.50/$.
 

Table 4: FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.50

306.85

CBN SMIS

330.00

330.00

I&E FX Window

360.93

360.50

Parallel Market

361.50

361.50

Source: CBN, FMDQ, REXEL BDC  

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