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T-bill Yields Decline as CBN Maintains Hold on OMO

Proshare

Tuesday, February 20, 2018/ 06.20 PM/Zedcrest Capital

Key Indicators

Inflation

15.13%

Declined by 0.24% in January from 15.37% in December 2017

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting of November 2017

External Reserves

$41.62billion

Accreted 1.70% as at 16 February from $41.58bn as at 15 February 2018

Brent Crude

$65.00pb

Fell by 0.44% from $65.29pb on 19 February 2018


Bonds
The bond market remained scantily traded in today’s session. We however witnessed slight buys on the short end of the curve (2019s - 2022s) towards the close of market, as market players took positions in anticipation of a lower clearing rate on the 2021 bond at tomorrow’s auction. This consequently compressed yields by c.4bps, reversing the slight uptick witnessed in the previous session. We expect slight buying interests to be sustained tomorrow, with expectations of favorable client demand at the bond auction. 

Benchmark FGN Bond Yields

Description

Bid (%)

Offer (%)

Day Change (%)

16.00 29-Jun-19

13.94

13.87

(0.13)

15.54 13-Feb-20

13.98

13.91

(0.12)

14.50 15-Jul-21

13.60

13.53

(0.11)

16.39 27-Jan-22

13.58

13.51

(0.01)

14.20 14-Mar-24

13.67

13.60

(0.03)

12.50 22-Jan-26

13.76

13.69

0.00

16.29 17-Mar-27

13.81

13.74

(0.01)

12.15 18-Jul-34

13.45

13.38

(0.01)

12.40 18-Mar-36

13.41

13.34

0.01

16.25 18-Apr-37

13.45

13.38

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 





Source: Zedcrest Dealing Desk

Bond Auction Expectations

Maturity

Offer (N'bn)

Expected Stop Rate (%)

Jul 2021

50.00

13.50 - 13.70

Feb 2028

50.00

13.70 - 13.90

 

Treasury Bills
The T-bills market was largely bullish, as yields trended downwards by c.15ps on average, with most demand observed on the short end of the curve (March - May maturities). The bullish sentiments were largely driven by the lack of an OMO issuance by the CBN for the third consecutive session, starting Friday the previous week. Whilst most market players interpret this to be a liquidity management measure in advance of the FGN Bond auction, others remain skeptical of the Apex banks’ motives, having witnessed a similar scenario in the last month of the year 2017. Barring a resumption in OMO issuance, we expect a continued downward trend in T-bill yields, as market players anticipate inflows from OMO maturities (c.N57bn) on Thursday.

Benchmark Treasury Bills Rates

Description

Bid (%)

Offer (%)

Day Change (%)

5-Apr-18

14.55

14.40

(0.80)

3-May-18

14.90

14.75

0.10

14-Jun-18

14.45

14.30

(0.15)

5-Jul-18

14.40

14.25

0.00

2-Aug-18

14.35

13.45

0.00

13-Sep-18

14.45

14.30

(0.20)

4-Oct-18

14.45

14.30

(0.10)

1-Nov-18

14.45

14.30

(0.05)

3-Jan-19

13.75

13.60

0.00

14-Feb-19

13.65

13.50

0.00

Source: Zedcrest Dealing Desk

Money Market

The OBB and OVN rates fell to 19.33% and 19.92% respectively, as there were no significant pressures on system liquidity currently estimated at c.N70bn positive. We expect rates to remain relatively stable at these levels, barring a significant OMO intervention by the CBN.

Proshare Nigeria Pvt. Ltd.
 
Source: FMDQ, Zedcrest Research

FX Market

The CBN Official spot rate remained stable at its previous day rate of N306.00/$, with its external reserves recorded to have improved by 1.70% to $41.62bn.

The spot rate in the Investors and Exporters’ FX Window appreciated by 0.01% to close at N360.25/$ from N360.28/$ in the previous session.

Rates in the Unofficial market remained stable at its previous rate of N360.80/$.

FX Rates

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.00

306.00

CBN SMIS

330.00

330.00

I&E FX Window

360.25

360.28

Parallel Market

360.80

360.80

Source: CBN, FMDQ, REXEL BDC 

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