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

Proshare

Thursday, March 07, 2019  01:35 PM / Zedcrest Capital

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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 15th Consecutive Time at the Jan. 22, 2019 MPC Meeting

External Reserves

$42.54bn

As at March 6, 2019. A c.0.16% increase from $42.47bn on March 5, 2019

Brent Crude

$66.10pb

As at March 7, 2019. A c.0.87% increase from $65.53pb on March 6, 2019

 

Bonds

The bond market remained scantily traded in today’s session, with yields slightly higher by c.4bps on the day. Demand interests have been relatively soft in recent sessions following slowdown in FPI purchases and slight profit taking by locals.

 

Bond yields seem to be relatively well supported at c.14% and we do not expect a significant deviation from this trend in the near term. We however continue to monitor developments in short term T-bill rates which could spur some demand on bonds if compressed significantly below current levels.

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.84

14.04

0.06

16.39 27-Jan-22

14.53

14.22

0.03

12.75 27-Apr-23

14.66

14.11

0.00

14.20 14-Mar-24

14.19

13.92

0.01

13.53 23-Mar-25

14.52

14.26

0.00

12.50 22-Jan-26

14.36

14.24

0.04

16.29 17-Mar-27

14.37

14.18

0.11

13.98 23-Feb-28

14.35

14.22

(0.01)

12.15 18-Jul-34

14.20

14.10

(0.05)

12.40 18-Mar-36

14.29

14.09

0.13

16.2499 18-Apr-37

14.23

14.01

0.07

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market traded on a bullish note despite the OMO auction by the CBN. This was as the CBN held off on the much antcipated long tenor offering which slightly dampened market interests for the auction. The auction consequently recorded a total subscription of c.N293bn of the N400bn offered, with rates maintained at 11.90% and 13.45% on the 91 and 175-day bills respectively.

Yields consequently compressed by c.30bps as market players rallied the long end of the curve as low as 12.50% before slight retracement to c.12.85% before the close of the trading session. We expect yields to remain relatively stable given our expectations for continued OMO auctions by the CBN to contain the relatively surplus system liqudity balance.

 


Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Mar-19

10.00

7.00

(1.00)

4-Apr-19

11.00

7.00

(1.00)

2-May-19

11.00

10.00

(1.00)

13-Jun-19

12.00

11.00

0.00

18-Jul-19

12.50

12.25

(0.25)

1-Aug-19

13.25

12.25

0.25

12-Sep-19

13.30

13.10

(0.20)

3-Oct-19

13.45

13.25

(0.20)

14-Nov-19

13.40

13.15

(0.30)

5-Dec-19

13.40

13.20

(0.30)

2-Jan-20

13.25

12.80

(0.35)

6-Feb-20

13.05

12.90

(0.55)

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates in the money market remained relatively stable with the OBB and OVN rates closing the session at 8.50% and 9.58% respectively. This was following a further increase in net system liquidity currently estimated at c.N317bn from c.N107bn in the previous session.

We expect rates to remain relatively stable, barring a significant OMO sale by the CBN tomorrow.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

8.50

8.83

Overnight (O/N)

9.58

9.75

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, the Naira/USD rates remained unchanged at N306.90/$ (Spot) and N356.92/$ (SMIS). The NAFEX rate in the I&E window weakened slightly by 0.16% to N360.49/$, with market turnover rising slightly higher to $564m. At the parallel market, the cash rate and transfer rates remained unchanged at N358.00/$ and N364.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.90

306.90

CBN SMIS

356.92

356.92

I&E FX Window

360.49

360.19

Cash Market

358.00

358.00

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereigns remained slightly bearish, with yields slightly lower by c.2bps on the day. We witnessed the most sell on the 47s and 49s which lost c.0.60pct on the day.

 

In the NGERIA Corps, we witnessed slight interest on the DIAMBK 19s.

 


Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.


 

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Proshare Nigeria Pvt. Ltd.

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