T-Bills Market Ends Bearish as CBN Conducts Special OMO Auction

Proshare

Friday, December 14, 2018/ 06:54AM / Zedcrest Capital

***Q3 2018 records overall BOP deficit *** - CBN

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at December 14, 2018. A c.2bps increase from 11.26% recorded in October 2018

MPR

14.00%

Left Unchanged for the 12th Consecutive Time at the Nov. 22, 2018 MPC Meeting

External Reserves

$42.88bn

As at December 13, 2018. A c.0.12% increase from $42.83bn on December 12, 2018

Brent Crude

$60.67pb

As at December 14, 2018. A c.1.61% increase from $59.71pb on December 13, 2018

 

Bonds

The FGN Bond market closed the week on a relatively quiet note, with slight interests on the 2028s and 2036s offset by some bearish retracement on the 2037s. Yields were consequently lower by c.1bp on the day.

 

We expect the market to trend slightly bearish next week, due to expectations for renewed supply of bonds from the forthcoming December FGN and Sukkuk Bond auctions.

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.28

14.95

0.00

14.50 15-Jul-21

15.75

15.50

0.00

16.39 27-Jan-22

15.10

14.88

(0.02)

14.20 14-Mar-24

15.26

15.10

0.00

12.50 22-Jan-26

15.79

15.65

(0.03)

16.29 17-Mar-27

15.71

15.61

(0.04)

13.98 23-Feb-28

15.86

15.75

(0.05)

12.15 18-Jul-34

15.74

15.61

(0.01)

12.40 18-Mar-36

15.67

15.51

(0.03)

16.2499 18-Apr-37

15.62

15.46

0.08

Source: Zedcrest Dealing Desk

 

Treasury Bills

Yields in the T-bills market remained elevated, as the CBN returned to the market with the same OMO tenors offered in the previous session. Market players sold off slightly on the short end of the curve, whilst there was slight demand around the mid tenors due to the more attractive rates in the secondary market.

 

In line with our expectation, the CBN conducted a special OMO auction (c.N39bn) to mop up further maturities, as market players undersubscribed the initial OMO auction with total bids of c.N39bn only of the N130bn offered. Rates were however maintained across tenors.

 

We expect the CBN to maintain its pace of OMO interventions in lieu of the c.N498bn in OMO and PMA maturities next week.

 

Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Jan-19

15.50

14.50

0.30

14-Feb-19

15.00

14.50

0.00

14-Mar-19

14.20

13.60

(0.10)

4-Apr-19

14.35

12.85

0.00

2-May-19

13.75

13.25

0.00

18-Jul-19

13.55

13.25

0.00

1-Aug-19

14.00

12.75

0.00

12-Sep-19

15.00

14.25

0.05

3-Oct-19

15.15

14.90

0.05

14-Nov-19

15.15

14.80

0.05

Source: Zedcrest Dealing Desk

 

Money Market

Rates in the money market trended higher by c.10pct, with the OBB and OVN rates closing the week at 24.57% and 27.21%, due to the c.N78bn OMO sale by the CBN which is estimated to have compressed system liquidity to c.N13bn positive as at COB today.

Rates are expected to trend higher in the coming week, as the CBN is expected to maintain its pace of OMO and FX (wholesale & retail) interventions in the market.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

24.57

16.50

Overnight (O/N)

27.21

17.25

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, the Naira/USD rate remained stable at N306.90/$ (spot) and N359.24/$ (SMIS). At the I&E FX window, the NAFEX closing rate depreciated further by c.0.06% to close at N365.23/$ from N365.00/$ previously.

 

At the parallel market, the cash and transfer rate depreciated by 0.08% and 0.14% to N363.00/$ and N366.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.90

306.90

CBN SMIS

359.24

359.24

I&E FX Window

365.23

365.00

Cash Market

363.00

362.70

Transfer Market

366.00

365.50

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereigns closed the week on a relatively quiet note having posted significant gains in the previous two sessions. Slight selloffs on the longer end of the curve (47s & 49s) were offset by some buying interests on the shorter end (22s), with yields closing flat on the day.

 

In the NGERIA Corps, yields returned bearish on the DIAMBK 19s and ACCESS 21s Sub, whilst we witnessed renewed buying interests on the ACCESS 21s Snr, Zenith 22s, UBANL 22s and FIDBAN 22s.


 

 Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.


 

Related News

1.       Funding Rates Moderate, as Market Players Undersubscribe CBN OMO

2.       Bond Yields Pare Losses amid Renewed Local Demand

3.       Invest in FGN Monthly Bond Auction – December 2018

4.       System Liquidity Falls To Negative Territory Amid Continued OMO Auctions

5.       Money Market Rates hit Five Month High as CBN Maintains OMO Interventions

6.       Sukuk Offer Opens at 15.743%; Average T-Bills Rate Advanced 73bps to 14.4% Sustaining Bearish Run

7.       Average Money Market Rate Rose to 8.24% to Settle at 25.21%

8.      Could The US Market Rally Signal A Coming Recession?

9.       Tight System Liquidity Pushes Funding Rates to a One Month High

10.   The CBN Conducts a Special OMO Auction In Anticipation Of More Fiscal Spending

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