Treasury bills remain toast of fixed income investors

Proshare

Wednesday, July 19, 2018 /10:00PM / Zedcrest Capital

*** DMO releases Bond auction Calendar for Q3 2018, increases offers to B100bn ***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.61%

NBS postpones release date for June 2018 CPI & Inflation report to July 23, 2018.

Expectations range between 10.90% & 11.20%.

MPR

14.00%

Left unchanged at 14.00% at the MPC meeting on April 4, 2018.

Next MPC meeting scheduled for July 23 & 24, 2018

External Reserves

$47.51bn

As at July 16, 2018. A c.0.60% decrease from $47.79bn as at July 2, 2018.

Brent Crude

$72.91pb

As at July 18, 2018. A c.1.43% increase from $71.88pb reported on July 17, 2018

 

 

Bonds

Yields in the bonds market continued to weaken across the curve, with yields expanding by c.0.02bps on the average across the curve. Demand pressures remained on the mid-end of the curve, where yields compressed by c.05bps on the FGN 2026 & 2028 maturities.

 

The Debt Management Office (DMO) released the much awaited Q3 2018 FGN Bond Calendar, with slightly higher volumes on offer, especially on the 10-yr Bond.

 

We expect Market reaction to this should be slightly bearish especially on the longer end of the curve.

 

FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.26

12.94

(0.01)

14.50 15-Jul-21

13.49

13.31

0.06

16.39 27-Jan-22

13.63

13.28

0.17

14.20 14-Mar-24

13.93

13.67

0.00

12.50 22-Jan-26

14.01

13.92

(0.03)

16.29 17-Mar-27

13.93

13.85

(0.02)

13.98 23-Feb-28

14.10

14.03

(0.07)

12.15 18-Jul-34

14.27

14.17

(0.01)

12.40 18-Mar-36

14.23

14.17

0.03

16.2499 18-Apr-37

14.23

14.11

0.02

Source: Zedcrest Dealing Desk


 Treasury Bills

The bullish rally in the T-bills market continued today, as discount rates compressed a further 16bps across the benchmark securities. Investor demand remained concentrated on the short to medium end of the curve, with discount rates compressing by 40bps on the average.

As expected at the Primary Auction, the DMO sold a total of N107.04bn across the 91-, 182- and 364-day tenors, while repaying N71.36bn in maturities. The rates for the 91-, 182- and 364-day bills closed at 10.00%, 10.50% & 11.49% respectively.

With OMO maturities of N430.18bn expected to hit the system tomorrow, we expect the Central Bank of Nigeria to float an OMO auction to manage excess liquidity. We expect the demand for T-bills to be sustained however as investors look to reinvest maturities from the T-bills repayment and bond coupon inflows.

Primary Market Auction  Results (18 July 2018)

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

91 days

10.00

5.85

6.64

5.85

182 days

10.50

26.60

26.82

26.60

364 days

11.49

145.96

140.94

74.59

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

2-Aug-18

10.90

10.45

(0.30)

13-Sep-18

10.90

10.60

(0.40)

4-Oct-18

9.55

8.00

(0.50)

1-Nov-18

11.00

10.70

(0.20)

6-Dec-18

11.85

11.50

(0.05)

3-Jan-19

11.85

11.55

(0.05)

14-Feb-19

12.05

11.80

0.20

14-Mar-19

12.05

11.25

(0.05)

4-Apr-19

12.05

11.00

(0.05)

Source: Zedcrest Dealing Desk


 

Money Market

Rates in the interbank money markets continue to drop amidst sustained system liquidity. The overnight (O/N) and Open Buy-Back (OBB) rates closed at 5.67% and 6.67%, in line with the theme of the week.

 

The CBN is expected to float an OMO auction tomorrow to manage excess system liquidity as a result of inflows from OMO maturities (N430.18bn) and net T-bills repayment (N71.36bn). The level of aggressiveness in mop up by the CBN will determine the direction of money market rates in the interim.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

5.67

7.50

Overnight (O/N)

6.67

8.58

Source: FMDQ, Zedcrest Research

 

FX Market

The Naira remained relatively stable, with the Interbank rate closing at N305.85/$ (from N305.80/$ previously. The NAFEX rate appreciated slightly by 1k, closing at N361.69/$ (from N361.70/$ previously).

 

The Naira is gradually strengthening in the parallel market, gaining N0.20k across both the USD cash and transfer rates which closed at N358.50/$ and N362.30/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.85

305.80

CBN SMIS

330.00

330.00

I&E FX Window

361.69

361.70

Cash Market

358.50

358.70

Transfer Market

362.30

362.50

Source: CBN, FMDQ, REXEL BDC

  

Eurobonds:

A quiet trading session for NGERIA Sovereigns saw yields further expand by c.09bps on the average across the trade tickers in repricing.

 

The NGERIA Corps on the other hand continue enjoy investor interests, as yields compressed by an average of c13bps across the curve. Trading activities were witnessed on the GTBANK 18s, ZENITH 19s & FIDBANK 22s.


Proshare Nigeria Pvt. Ltd.

 

 
Proshare Nigeria Pvt. Ltd.


Related News

1.       Liquidity supports demand pressures, but only at the short end

2.       Ahead Of Next T-Bills Auction Scheduled 18th of July 2018

3.       Markets remain cautions amidst buoyant liquidity

4.       Fixed Income Market Monitor- Average Money Market Rate Decreased Marginally to 9.17%

5.       Cautious trading as market rates adjust

6.       OMO Auction tapers excess liquidity, bonds rally on demand

7.       Mixed Trading for Nigerian Markets

8.       Oil price recovery positive for Nigerian Eurobonds

9.       Sovereign Green Bond Issuance to Accelerate as Governments Seek to Promote Sustainable Policies

10.   Renewed Investors’ Interests Drive Recovery in Nigerian Eurobonds

11.   Fixed Income Market Monitor – Average Money Market Rate Decreased Marginally By 1.50%

12.   Money Market- Mildly Bearish Position Takes Hold

13.   Funding Rates Rise Back to Double Digits as Banks fund for Retail FX

14.   Fixed Income Monthly Update: June 2018 - Foreign Selloffs Stoke ''Bear Steepener''

 

READ MORE:
Related News
SCROLL TO TOP