System Liquidity support bullish interests in the Fixed Income Markets

Proshare

Thursday, September 05, 2018 /05:26AM / Zedcrest Capital

 

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.14%

As at August 15, 2018, 9bps down from 11.23% recorded in June 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$45.55bn

As at September 3, 2018. A c.0.17% decrease from $45.63bn on Sept. 3, 2018

Brent Crude

$77.27pb

As at September 4, 2018. A c.1.42% decrease, from $78.38pb on Sept. 4, 2018

 

 

Bonds

The bond market traded with bullish sentiments today, as demand from local and off-shore players were witnessed across the mid- to long-end of the curve causing average yields to compress by c.4bps to close at 15.11%. Major gainers of the day were the 2027s & 2028s at the mid-end and 2037s at the long-end of the curve.

 

We expect the market to remain be order driven as investors pick out attractive yields offered. We however remain wary of external factors, including weak EM sentiments as this could provide risk-off investors with opportunities to exit positions on local bonds.

 

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.48

14.08

0.00

14.50 15-Jul-21

15.01

14.92

0.00

16.39 27-Jan-22

14.64

14.25

(0.07)

14.20 14-Mar-24

15.03

14.86

0.01

12.50 22-Jan-26

15.24

15.21

(0.07)

16.29 17-Mar-27

15.24

15.16

(0.04)

13.98 23-Feb-28

15.25

15.16

(0.07)

12.15 18-Jul-34

15.42

15.33

(0.03)

12.40 18-Mar-36

15.39

15.25

(0.01)

16.2499 18-Apr-37

15.39

15.22

(0.07)

Source: Zedcrest Dealing Desk

 

Treasury Bills

The T-bills market continued to trade bullish supported by buoyant system liquidity. Yields across the NTBills curve compressed by c.13bps to close at 11.51% on the average.

 

The CBN floated a second OMO auction this week, expanding its offering to three maturities as it looked to aggressive attack excess liquidity. The Apex bank sold a total of N137.59bn across the 64-. 127- and 190-day maturities with stop rates were cut at 10.00%. 11.50% and 12.15% respectively.

 

We expect bullish sentiments on T-bills to remain as system liquidity levels remain high. We also expect the CBN to maintain its stance on OMO rates at subsequent auctions, with another expected tomorrow.


OMO Auction Result

Tenor

Rate (%)

Offer (N’bn)

Sub (N'bn)

Sale (N'bn)

64 days

10.00

100.00

9.80

7.50

127 days

11.50

100.00

10.05

4.00

190 days

12.15

200.00

137.09

126.09

 

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

13-Sep-18

10.05

7.45

0.80

4-Oct-18

10.95

10.35

(0.05)

1-Nov-18

10.95

10.55

(0.30)

6-Dec-18

11.45

11.25

(0.05)

3-Jan-19

11.90

11.55

(0.40)

14-Feb-19

12.30

12.10

0.00

14-Mar-19

12.15

12.00

(0.10)

4-Apr-19

11.75

11.45

(1.05)

18-Jul-19

12.05

11.50

(0.05)

Source: Zedcrest Dealing Desk

 

Money Market

Interbank lending rates remained relatively stable amidst buoyant System liquidity, despite another OMO auction sale by the CBN. The OBB and OVN closed at 3.17% and 4.00% respectively, as System liquidity is estimated to close today at c.N509.44bn net positive.

 

The CBN sold a total of N137.59bn at an OMO auction today as it continues its strategy to manage liquidity levels.

 

With inflows from OMO maturities of N294.52bn expected tomorrow, we expect the CBN to float an OMO auction for the third time week to counter the maturities. We thus rates to remain relatively stable.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

3.17

3.08

Overnight (O/N)

4.00

3.92

Source: FMDQ, Zedcrest Research

FX Market

The Naira/USD rate traded stable at the interbank, closing at N306.20/$ (Unchanged DoD). At the I&E FX window, a total of $408.08mn was traded in 292 deals, with rates ranging between N356.00/$ - N364.00/$. The NAFEX closing rate depreciated by 0.26% to N363.04/$ from N362.11/$ previously.

 

At the parallel market, the cash rate remained stable at N359.20/$, while the transfer rate closed 0.14% lower at N362.00/$.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.20

306.20

CBN SMIS

358.87

357.95

I&E FX Window

363.04

362.11

Cash Market

359.20

359.20

Transfer Market

362.00

361.50

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The NGERIA Sovereigns continued to weaken as sell-offs continued across the curve. Today’s trade session saw yields tick up 10bps, to close at 7.56% on the average across the curve.

 

The NGERIA Corps showed more resilience than the Sovs, as demand interests were witnessed across the trading tickers. Investors looked for short duration, with the ACCESS 2021 Subs and FBNNL 2021s the biggest gainers of the day as yields compressed by c.150bps & 165bps respectively.

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

 

Related News

1.       External Factors Propel Yields to New Frontiers

2.       Central Bank defies expectations, maintains rates at OMO auction

3.       Bearish Sentiments Persist in Bond Market, amid Bargain Hunting by Local RMCs

4.       Money Market Rate Decreased Marginally Last Week as Overnight Rate Fell to 6.83%

5.       September 2018 FGN Savings Bond Offer for Subscription

6.       Bond Market Closes the Month Bearish as EM Pressures Persist

7.       Bond Yields Hit 9-Month High as CBN holds off on OMO Sale

8.       Bond Yields to Break 15% Resistance, as DMO Clears 1yr PMA Bill at c.15% Effective Yield

9.       Bond Bulls Cherry-Pick on Higher Yielding Maturities as Market Maintains Balance

10.   Summary of August 2018 FGN Bond Auction Results

11.   Short end T-bill Yields Trend Lower as Market players Maintain Risk Averse Posture

12.   Fixed Income Market Monitor - Average T-Bills Yield Fell by 5bps to Close The Week at 12.15%

13.   Markets close on a Calm note as Locals Remain Net Buyers of Bonds

 

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