T-bills Market Trends Bearish as CBN Hikes OMO Rate

Proshare

Friday, September 19, 2018/ 06.37AM /Zedcrest Capital

***Oil Traders Consider Nigerian Proposal to Prolong Fuels Swap***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.28%

As at October16, 2018,5bps up from 11.23% recorded in August 2018.

MPR

14.00%

Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting

External Reserves

$42.84bn

As atOctober17, 2018. A c.0.16% decrease from $42.91bnon October16, 2018

Brent Crude

$79.76pb

As at October 18, 2018. A c.0.54% decreasefrom$80.19pbon October 17, 2018

 

 

Bonds

The bond market remained relatively flat, but spreads tightened as offers improved slightly across most maturities, due to expectations of a hike in OMO rates by the CBN. Yields ticked higher on the longer end of the curve, while they compressed slightly on the shorter end, save for the 24s which ticked higher for the second consecutive session. On the average, yields were down by c.1bp on the day.

 

We expect a continued bearish positioning by market players as yields become gradually more attractive on T-bills, whilst we look forward to the FGN bond auction, where the DMO expects to raise N115bn in 5, 7 and 10yr bonds.

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.11

13.60

0.04

14.50 15-Jul-21

14.93

14.70

(0.11)

16.39 27-Jan-22

14.66

14.20

(0.12)

14.20 14-Mar-24

15.16

14.99

0.06

12.50 22-Jan-26

14.93

14.87

(0.06)

16.29 17-Mar-27

15.10

15.07

(0.03)

13.98 23-Feb-28

15.29

15.25

0.01

12.15 18-Jul-34

15.30

15.24

0.03

12.40 18-Mar-36

15.29

15.11

0.01

16.2499 18-Apr-37

15.18

15.02

0.03

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market traded on a signifcantly bearish note, with yields trending higher by c.20bps.Selloffs were mostly on the longer tenured bills (Sep – Oct), as news of a higher than expected OMO clearing rate filtered into the market early into the trading session.

 

The expectations for higher OMO rates were confirmed by the OMO auction result released later in the day, as the CBN sold a total of c.275bn at +25bps higher on the 105 and 182 day bills and +50bps higher on the 329 day bill. With the effective yield on the long tenor OMO now at c.16%, yields on the long end of the curve have now hit levels last seen at the start of the year.

 

We expect the market to close the week on a relatively flat note. Market players should however cherry pick on some attractive bills on the shorter end of the curve.

 


OMO  Auction Result

Tenor

Rate (%)

Offer (N’bn)

Sub (N'bn)

Sale (N'bn)

105 day

11.25

50.00

0.12

0.12

182 day

12.75

100.00

45.70

45.70

329 day

14.00

200.00

229.52

229.52


Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

1-Nov-18

13.65

13.30

(0.40)

6-Dec-18

13.10

12.90

0.20

3-Jan-19

13.50

12.85

0.95

14-Feb-19

13.10

12.70

0.30

14-Mar-19

13.00

12.85

0.20

4-Apr-19

12.75

12.40

0.20

18-Jul-19

13.50

12.70

0.50

1-Aug-19

13.50

13.00

0.20

12-Sep-19

13.90

13.50

0.40

3-Oct-19

13.65

13.50

0.15

Source: Zedcrest Dealing Desk 

 

 

Money Market

In line with our expectations, the OBB and OVN rates, dipped below the 20% mark, closing today at 13.33% and 14.58%, as system liquidity was slightly bolstered by the net OMO and bond coupon payments (+104bn) today. System liquidity is consequently estimated at c.N76bn positive from a negative position of c.N28bn opening the day.

 

We expect rates to close the week at these levels, as there are no significant outflows expected tomorrow.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

13.33

22.67

Overnight (O/N)

14.58

24.79

Source: FMDQ, Zedcrest Research 

 

FX Market

At the Interbank, the Naira/USD rate remained stable at N306.50/$ (spot) and N362.52/$ (SMIS). At the I&E FX window a total of $70.74mn was traded in 284 deals, with rates ranging between N358.00/$ - N365.30/$. The NAFEX closing rate depreciated by c.0.10% toN364.33/$ from N363.96/$ previously.

 

At the parallel market, the cash rate and transfer rates depreciated by 40k and 50k to N360.50/$ and N364.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.50

306.50

CBN SMIS

362.52

362.52

I&E FX Window

364.33

363.96

Cash Market

360.50

360.10

Transfer Market

364.00

363.50

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereigns remained firmly bearish in today’s session, on the back of the approval of a New Eurobond issuance by the Nigerian senate yesterday. Yields were higher by c.10bps d/d, with the most selloffs still on the 20-yr (2038).

               

In the NGERIA Corps, the DIAMBK 19s gave up some gains, while interests remained strong onthe SEPLLN 23s.

 

 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

 

Related News

 

1.       PMA Rates Clear Higher Amid Tighter System Liquidity

2.       Invest in FGN Monthly Bond Auction – October 2018

3.       Bargain Hunt on Short Tenors Bills ahead of PMA

4.       Bond Market Opens Bearish as Weakness in Mid-Tenors Persist

5.       Treasury Bill Auction Schedule For October 17th 2018

6.       Money Market Rate Decreased Marginally as OVN and OBB Fell to 19.75% and 19.17% Respectively

7.       Bond Market Turns Bearish Following Selloff on Mid-Tenors

8.      FBN Nigeria Eurobond (USD) Fund Mitigating Minimum Entry Investment Required for Eurobonds

 

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