System Liquidity closes above N400bn as inflows from FAAC and FX Refunds Hit the System

Proshare

Monday, December 11, 2017 6:30PM / @ZedcrestCapital 

***
CBN slashes interest on AGSME fund to 5%*** 

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

$35.86billion

Accreted 1.97% as at 7th December from $35.73 as at 6th December 2017

Brent Crude

$64.06pb

Rose by 0.72% from $63.60pb on 8th December 2017


Bonds

The bond market maintained its steep decline in today’s session, as market sentiment remained bullish in reaction to the continuous decline in T-bill yields. The 10– and 20-yr bonds were the most sought after, while the 2019 and 2020 bonds recorded the highest price gains, with yields dropping by 55 and 57bps respectively.  Average bond yields consequently declined by 21bps to 14.05%, even as the 2019, 2020 and 2037 bonds began trading below 14%. We expect a further compression of the yield curve to our target level of c.14.00%, ahead of the bond auction scheduled to hold on Wednesday.  

Table 1: Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

13.94

13.87

(0.55)

15.54 13-Feb-20

13.56

13.49

(0.57)

14.50 15-Jul-21

14.32

14.25

(0.17)

16.39 27-Jan-22

14.08

14.01

(0.09)

14.20 14-Mar-24

14.07

14.00

(0.19)

12.50 22-Jan-26

14.24

14.17

(0.12)

16.29 17-Mar-27

14.25

14.18

(0.06)

12.15 18-Jul-34

14.10

14.03

(0.07)

12.40 18-Mar-36

14.01

13.94

(0.07)

16.25 18-Apr-37

13.94

13.87

(0.17)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Source: Zedcrest Dealing Desk  

Treasury Bills
The T-bills market maintained its downward momentum in today’s session, with yields dropping by an average of 70bps across the curve. We witnessed the most interests on the 28– Dec (-545bps to 8.30%), 19-Apr (-390bps to 11.00%) and 19-Jul (-225bps to 11.25%) bills during the trading session. Average T-bill yields consequently fell to 15.54%, from 16.24% in the previous session. We expect this downward trend to be sustained, in the absence of any significant intervention by the CBN.  

Table 2: Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

4-Jan-18

14.00

13.75

(1.00)

1-Feb-18

15.60

15.35

0.00

1-Mar-18

14.00

13.75

0.00

5-Apr-18

13.50

13.25

(1.95)

3-May-18

14.00

13.75

(1.35)

14-Jun-18

14.50

14.25

(1.00)

5-Jul-18

15.00

14.75

0.00

2-Aug-18

15.50

15.25

0.00

20-Sep-18

14.20

13.95

0.00

4-Oct-18

13.80

13.55

0.00

1-Nov-18

13.25

13.00

(0.25)

Source: Zedcrest Dealing Desk  

Money Market

The OBB and OVN rates fell to 3.25% and 4.08%, on the backdrop of inflows from FAAC payments (C.N255bn) and Retail FX refunds by the CBN. System liquidity is consequently estimated to close today at C.N463billion positive. We expect rates to remain lowered as market players anticipate inflows from OMO (N70bn) and Stab sec maturities (c.N200bn) later this week. 

Table 3: Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

3.25

5.17

Overnight (O/N)

4.08

6.25

Source: FMDQ, Zedcrest Research


FX Market
The CBN Official spot rate appreciated marginally by 0.02% to N306.35/$ from N306.40/$ recorded in the previous session. Rates at the Investors and exporters FX window fell slightly by 9k to close at N360.50/$. Rates at the parallel market however remained stable at N361.40/$.

Table 4: FX Rates

 

Current (N/$)

Previous

(N/$)

CBN Spot

306.35

306.40

CBN SMIS

330.00

330.00

I&E FX Window

360.50

360.41

Parallel Market

361.40

361.40

Source: CBN, FMDQ, REXEL BDC 

For more details email research@zedcrestcapital.com or call the dealing desk via 01-6311667 
 

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