T-bill Yields Compress as Funding Pressures Ease

Proshare

Tuesday, February 20,  2019  06:00 AM / 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

$42.74bn

As at February 18, 2019. A c.0.23% decrease from $42.84bn on February 15, 2019

Brent Crude

$65.92pb

As at February 19, 2019. A c.3.48% increase from $66.30pb on February 18, 2019

 

Bonds

The Bond Market was scantily traded, with yields marginally lower by c.2bps on the day, following a slight tightening in bid-ask spreads on some short and mid tenors.

 

The DMO will offer N50bn each of the 2023, 2025 and 2028 bonds at an auction tomorrow, and we expect stop rates to decline by c.50bps from their previous auction levels, in tune with the recent bullish trend since the last bond auction which has seen average bond yields decline from 15.20% on 30-Jan to 14.70% as at 19-Feb.

 


FGN Bond Auction Expectation

Tenor

Offer (N'bn)

Expected Stop Rate (%)

Apr 2023

50.00

14.50 - 14.65

Mar 2025

50.00

14.60 - 14.75

Feb 2028

50.00

14.65 - 14.85

Source: Zedcrest Research

 

 

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

15.07

14.71

(0.05)

16.39 27-Jan-22

14.63

14.11

(0.02)

14.20 14-Mar-24

14.59

14.41

0.00

12.50 22-Jan-26

14.77

14.55

(0.05)

16.29 17-Mar-27

14.80

14.67

0.00

13.98 23-Feb-28

14.84

14.79

(0.03)

12.15 18-Jul-34

14.60

14.36

0.00

12.40 18-Mar-36

14.55

14.22

(0.05)

16.2499 18-Apr-37

14.45

14.16

0.05

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market traded on a slightly bullish note in today’s session, as the CBN held off on OMO for a second consecutive session. Yields consequently compressed by c.20bps on the day, with RM clients picking on offers on the longer end of the curve, coupled with some short covering by market players on some short tenor bills.

We expect the market to remain relatively stable tomorrow, barring a resumption in OMO sales by the CBN which could spook yields higher.

Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Mar-19

9.00

8.00

(3.00)

4-Apr-19

13.25

12.55

(0.25)

2-May-19

12.80

11.00

0.80

13-Jun-19

13.00

10.75

0.00

18-Jul-19

13.00

12.40

(0.50)

1-Aug-19

13.00

12.35

0.00

12-Sep-19

14.35

14.15

(0.30)

3-Oct-19

14.85

14.60

(0.15)

14-Nov-19

14.95

14.75

0.00

5-Dec-19

14.95

14.75

0.00

2-Jan-20

14.90

14.85

(0.15)

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates in the money market fell back by c.7pct in today’s session, as market funding pressures eased from the significant squeeze witnessed in the previous session.

We expect rates to remain relatively stable at current levels, barring a renewed OMO sale by the CBN.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

15.00

23.33

Overnight (O/N)

15.83

26.08

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank, the Naira/USD rate remained stable at N306.80/$(Spot) and N357.10/$(SMIS). The NAFEX rate in the I&E window depreciated further by c.0.04% to N362.20/$. At the parallel market, the cash rate depreciated further by 0.08% to N358.50/$, while the transfer rate remained unchanged at N365.00/$.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.80

306.80

CBN SMIS

357.10

357.10

I&E FX Window

362.20

362.07

Cash Market

358.50

358.20

Transfer Market

365.00

365.00

Source: CBN, FMDQ, REXEL BDC

 

 

 

Eurobonds

The NGERIA Sovereigns posted a rebound in today’s session, with yields compressing by c.5bps following renewed demand mostly on the long end of the curve 31s – 49s.

 

In the NGERIA Corps, investors were slightly bearish on the DIAMBK 19s, ZENITH 22s, and UBANL22s.


Proshare Nigeria Pvt. Ltd.


 

Proshare Nigeria Pvt. Ltd. 

 

 

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