Sustained Rallies on Bonds following Successful Eurobond Outing

Proshare

Friday, February 16, 2018/6.00pm/Zedcrest Capital

***NIGERIA IN TALKS with JPMORGAN TO RETURN TO EM BOND INDEX*** - DMO
 

KEY INDICATORS

Inflation

15.13%

Declined by 0.24% in January from 15.37% in December 2017

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting of November 2017

External Reserves

$41.54billion

Accreted 1.71% as at 14 February from $41.47bn as at 13 February 2018

Brent Crude

$64.83pb

Rose by 1.31% from $63.99pb on 15 February 2018

 
Bonds

The bond market maintained its bullish rally to close the week on a firmly positive note, as yields declined by c.9bps with significant client interest observed especially on the 5-year and 20-year bonds. The bullish sentiments were primarily driven by the Eurobond floated in the previous session and the lack of an OMO auction in today’s session, consequently fueling mild speculations amongst some market players. We expect the market to open the coming week on a firmly positive note, as bullish expectations remain rife in the market.

 

Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

13.99

13.92

(0.21)

15.54 13-Feb-20

14.04

13.97

(0.07)

14.50 15-Jul-21

13.66

13.59

(0.15)

16.39 27-Jan-22

13.60

13.53

(0.12)

14.20 14-Mar-24

13.67

13.60

(0.02)

12.50 22-Jan-26

13.76

13.69

(0.06)

16.29 17-Mar-27

13.78

13.71

(0.05)

12.15 18-Jul-34

13.44

13.37

(0.07)

12.40 18-Mar-36

13.36

13.29

(0.01)

16.25 18-Apr-37

13.34

13.27

(0.10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Zedcrest Dealing Desk   

Treasury Bills
The T-bills market traded on a relatively flat note with a slight uptick of c.7bps in average yields. This came on the backdrop of a squeeze in system liquidity following funding for retail FX bids by banks. We however witnessed some client interests on the 1-yr 14-feb bill issued in the previous day’s auction as market players have begun to price in a possible cut in PMA issuance following the successful Eurobond sales in the previous session. We however expect yields to be relatively stable in the coming week, barring a discontinuance of the regular OMO auctions by the CBN.

 

Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

5-Apr-18

15.30

15.15

0.10

3-May-18

14.80

14.65

0.10

14-Jun-18

14.70

14.55

0.00

5-Jul-18

14.50

14.35

0.05

2-Aug-18

14.35

13.45

(0.15)

13-Sep-18

14.65

14.50

0.05

4-Oct-18

14.60

14.45

0.10

1-Nov-18

14.50

14.35

0.05

3-Jan-19

13.75

13.60

0.00

14-Feb-19

13.65

13.50

(0.05)

Source: Zedcrest Dealing Desk 


Money Market

The OBB and OVN rates rose sharply to 18.17% and 19.50% respectively due to funding for retail SMIS by banks. System liquidity is however expected to close on a positive note, having opened robustly positive at c.N370bn long. We expect rates to remain slightly elevated at these levels, due to expectations of continued OMO and FX sales (wholesale) by the CBN on Monday.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

18.17

6.67

Overnight (O/N)

19.50

6.92

 

 

 

 

 


Source: FMDQ, Zedcrest Research
  


FX Market

The CBN Official spot rate remained stable at its previous day rate of N305.95/$, with its external reserves recorded to have improved by 1.71% to $41.54bn as at 14th of February, 2018.

The spot rate in the Investors and Exporters’ FX Window depreciated by 0.06% to close at N360.36/$ from N360.13/$ in the previous session.

Rates in the Unofficial market however remained stable at N361.30/$. 

FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.95

305.95

CBN SMIS

330.00

330.00

I&E FX Window

360.36

360.13

Parallel Market

361.30

361.30

Source: CBN, FMDQ, REXEL BDC

 

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