Weak German Data, UST Curve Inversion Weigh on EM Risk Assets

Proshare

Friday, March 22, 2019 06:15 PM / Zedcrest Capital


***U.S. Treasury Yield Curve Inverts for First Time since 2007***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.31%

As at March 15, 2019. A c.6bps decline from 11.37% recorded in January 2019

MPR

14.00%

Left Unchanged for the 15th Consecutive Time at the Jan. 22, 2019 MPC Meeting

External Reserves

$43.51bn

As at March 20, 2019. A c.0.23% increase from $43.41bn on March 19, 2019

Brent Crude

$66.72pb

As at March 22, 2019. A c.1.30% decrease from $67.60pb on March 21, 2019

 

Bonds

The FGN Bond market traded on a relatively flat note, with slight demand on the short end of the curve compressing yields marginally by c.2bps on the day. We also witnessed slight buys on the 2037s with trades at c.14.14%.

 

We expect the market to remain relatively muted ahead of the FGN Bond auction scheduled for the 27th whilst we expect the CBN to keep rates unchanged at its MPC meeting scheduled for the 25th and 26th next week.

 


Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.73

14.31

0.10

16.39 27-Jan-22

14.31

142.21

(0.11)

12.75 27-Apr-23

14.61

14.30

(0.10)

14.20 14-Mar-24

14.48

13.92

(0.01)

13.53 23-Mar-25

14.45

14.37

(0.08)

12.50 22-Jan-26

14.59

14.34

0.04

16.29 17-Mar-27

14.52

14.27

0.02

13.98 23-Feb-28

14.30

14.24

0.00

12.15 18-Jul-34

14.41

14.20

(0.02)

12.40 18-Mar-36

14.31

14.12

(0.08)

16.2499 18-Apr-37

14.23

14.12

(0.03)

Source: Zedcrest Dealing Desk

 

Treasury Bills

The T-bills market traded on a relatively flat note as buying interests were constrained by the tight system liquidity levels from the signifcant OMO sale in the previous session. Market players are also trading on a slightly cautious tone in anticipation of continued OMO auctions by the CBN.

We expect the market to remain constrained by system liqudity pressures opening the new week, with the CBN expected to resume its weekly wholsale FX auction. We also expect the CBN to maintain its spate of OMO interventions to mop up increased inflows from FAAC payments and OMO maturities expected towards the next weekend.

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Apr-19

12.00

10.00

0.00

2-May-19

11.00

9.00

0.00

13-Jun-19

12.00

11.00

0.00

18-Jul-19

12.50

12.00

0.00

1-Aug-19

12.85

11.85

(0.15)

12-Sep-19

13.30

13.00

0.00

3-Oct-19

13.25

13.00

0.05

14-Nov-19

13.25

13.05

0.05

5-Dec-19

13.25

13.05

(0.05)

2-Jan-20

13.15

13.05

0.00

6-Feb-20

13.10

12.85

(0.10)

Source: Zedcrest Dealing Desk 

 

 

Money Market

Rates in the money market remained slightly elevated as system liquidity fell into negative territory of c.N20bn following the significant OMO sale by the CBN in the previous session. The OBB and OVN rates consequently ended the session at 14.25% and 14.83% respectively.

We expect rates to remain elevated opening the new week, with System liquidity expected to be further compressed by a wholesale FX auction by the CBN.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

14.25

16.00

Overnight (O/N)

14.83

17.25

Source: FMDQ, Zedcrest Research

 

 

 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N305.90/$ in the Spot market, while the SMIS rate was strengthened by c.0.32% to N355.78/$. The NAFEX closing rate in the I&E window appreciated marginally by 0.01% to N360.43/$, whilst the cash and transfer rates at the parallel market remained unchanged at N358.00/$ and N364.00/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.90

306.90

CBN SMIS

355.78

356.92

I&E FX Window

360.43

360.47

Cash Market

358.00

358.00

Transfer Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns weakened slightly in today’s sessions as fears of a slowdown in global growth following weak manufacturing data from Germany and the 3m - 10yr UST yield curve inversion weighed on risk assets. Yields were consequently higher by c.5bps on the day.

 

Interests were relatively muted in the NGERIA Corps, with slight sell on the UBANL and ZENITH 22s.

 


Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.

 

 

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