Tight System Liquidity Pushes Funding Rates to a One Month High

Proshare

Saturday, December 08, 2018/ 09:24AM / Zedcrest Capital

*** Oil Soars after OPEC and Partners Reach Deal, positive sentiments return on Eurobonds ***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.26%

As at November 21, 2018. A c.2bps down from 11.28% recorded in September 2018

MPR

14.00%

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

External Reserves

$42.49bn

As at December 5, 2018. A c.0.19% increase from $42.41bn on December 4, 2018

Brent Crude

$63.18pb

As at December 7, 2018. A c.5.56% increase from $59.85pb on December 6, 2018

 

Bonds

The FGN bond market traded on a mixed note today with slight demand seen across selected long-end maturities (28s to 37s), while more sellers remained at the short-end of the bond curve, due to higher yields obtainable on long tenured T-bills. The c.200bps spread between short tenor bonds and the One year T-bills gives more impetus for a yield pickup switch (e.g. Sell the 2020 bond at 15.24% and Buy the 1-year T-bill at 17.64%).

 

We anticipate a very quiet FGN bond market going into next week, with further weakening of the yield curve expected as the FGN Sukuk bond issuance window gathers momentum.

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.24

14.90

0.00

14.50 15-Jul-21

15.69

15.37

0.00

16.39 27-Jan-22

15.01

14.79

0.02

14.20 14-Mar-24

15.29

15.04

0.00

12.50 22-Jan-26

15.84

15.71

0.00

16.29 17-Mar-27

15.79

15.70

(0.01)

13.98 23-Feb-28

16.01

15.86

(0.02)

12.15 18-Jul-34

15.76

15.59

(0.04)

12.40 18-Mar-36

15.77

15.67

(0.03)

16.2499 18-Apr-37

15.65

15.50

0.00

Source: Zedcrest Dealing Desk

 

Treasury Bills

The bears dominated the T-bills market today as the tight system liquidity weighed-in on secondary market yields. Yields expanded by c.21bps on the average across quoted benchmark T-bills securities, with continued sell-off seen at the short- to mid-end of the curve. The long-end of the curve traded flat as yields stood at 17.64% for the longest traded T-bills maturity.

We expect the T-bills market to remain bearish in the coming week in light of dwindling market liquidity and dampened investor appetite for T-bills. The CBN is expected to continue the issuance of OMO T-bills in line with their recent hawkish stance which supports yields trending northwards.

Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Jan-19

15.00

13.00

0.50

14-Feb-19

15.00

14.40

0.00

14-Mar-19

14.50

14.25

0.25

4-Apr-19

14.50

12.85

0.50

2-May-19

14.00

12.90

0.00

18-Jul-19

14.00

12.75

0.25

1-Aug-19

15.00

14.50

0.45

12-Sep-19

15.00

14.50

0.00

3-Oct-19

15.10

14.50

0.00

14-Nov-19

15.10

14.90

0.10

Source: Zedcrest Dealing Desk

 

Money Market

System liquidity squeezed further as expected as market participants funded for FX Retail interventions by the CBN. Consequently, Open Buy-Back (OBB) and Overnight (O/N) rose sharply to a one month high of 24.33% (from 7.79%) and 26.08% (from 8.71%) respectively.

We expect funding rates to remain elevated in the coming week as the CBN is likely to continue its aggressive liquidity mop up activities in anticipation of a combined NTB & OMO maturities of c.N551bn.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

24.33

7.79

Overnight (O/N)

26.08

8.71

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank market, the Naira/USD rate remained unchanged to close at N306.85/$ (spot) and N359.81/$ (SMIS). At the I&E FX window a total of $332.24 traded in 354 deals, with rates ranging between N356.00/$ - N366.50/$. The NAFEX closing rate depreciated further by c.0.05% to close at N365.33/$ from N365.16/$ previously.

 

At the parallel markets, the naira appreciated as supply of the greenback hits the street daily. The cash and transfer rates appreciated by c0.54% and c.0.27% to close at N366.00 and N369.00 respectively

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.85

306.85

CBN SMIS

359.16

359.16

I&E FX Window

365.33

365.16

Cash Market

366.00

368.00

Transfer Market

369.00

370.00

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

Some positive news coming in today for Oil related sovereign debt papers following the announcement of a 1.2mbpd supply cut agreement by the OPEC+ countries as well as decent U.S. Non-farm payroll figures (posted below analyst expectations). Valuations across the NGERIA Sovereign Eurobond curve saw yields decline by c.13bps on the average across the curve. We saw demand interest across most of the tracked papers, especially the on –the- run NGERIA 25s, 31s and 49s bonds.

 

The NGERIA Corps traded with less enthusiasm, but with some positivity nonetheless. We witnessed demand interests in DIAMBK 19s, FIDBAN 22s and UBANL 22s which saw yields drop by c.123bps, c.8bps and c.4bps respectively on those tickers.



Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


 

Related News

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

2.       Fixed Income Market Maintains Bearish Posture As The CBN Carries On With OMO Auctions

3.       The CBN Accelerates Its Liquidity Mop Up Exercise With A Fourth Consecutive OMO Auction

4.       Yields Continue to Rise as CBN Maintains Rates at 3rd Consecutive OMO Auction

5.       Bullish Run Reversed as Yield on Long Dated Bills Hit 17.0%

6.       Money Market Rate Increased Significantly Last Week As The Overnight Rate Rose To 17.36%

7.       Access Bank Plc Series XX N30billion Commercial Paper Closes Tomorrow

8.      December 2018 FGN Savings Bond Offer for Subscription

 

READ MORE:
Related News
SCROLL TO TOP