Yield Curve Nears Inversion as DMO Clears 1-Year Bill at 15.60% eff. Yield

Proshare

Thursday, September 12, 2018    08.42 PM / Zedcrest Capital

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KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.14%

As at August 15, 2018, 9bps down from 11.23% recorded in June 2018.

MPR

14.00%

Next MPC meeting scheduled for September 24 & 25, 2018

External Reserves

$45.28bn

As at September 10, 2018. A c.0.07% decrease from $45.31bn on Sept. 9, 2018

Brent Crude

$79.56pb

As at September 12, 2018. A c.1.25% increase from $78.58pb on Sept. 11, 2018

 

 

Bonds

The Bond market remained flat on the day, as market players continued to stay on the sidelines. We witnessed some continued interests on the mid-tenors (26s -28s) at c.15.10% - 15.15%, whilst we saw slight sell on the 2036s up to c.15.49% at the close of trading.

 

Market players look to be content with bond yields at these levels, but we maintain a short bias in view of the continued weakness in Emerging markets and rising interest rates in the US, with expectations of a 3rd rate hike this year by the US FED at its FOMC meeting to hold on the 25th and 26th of this month, also coinciding with the DMO’s monthly bond auction.

 

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.37

13.90

(0.05)

14.50 15-Jul-21

15.23

15.03

0.06

16.39 27-Jan-22

15.14

14.85

(0.06)

14.20 14-Mar-24

15.15

14.98

(0.15)

12.50 22-Jan-26

15.18

15.13

(0.04)

16.29 17-Mar-27

15.18

15.12

0.04

13.98 23-Feb-28

15.21

15.14

0.00

12.15 18-Jul-34

15.43

15.32

(0.03)

12.40 18-Mar-36

15.44

15.33

(0.03)

16.2499 18-Apr-37

15.46

15.30

0.02

Source: Zedcrest Dealing Desk

  

Treasury Bills

Yields in the T-bills space rose further by c.25bps in today’s session, as market players continued to selloff on the short end of the curve in anticipation of higher stop rates at the Primary Market Auction held today.

 

The DMO held rates on the 91 and 182 day bills, while it raised rates on the 364-day by c.30bps to 13.50% (15.60% eff. yield), in a bid to rollover the total maturities on the tenor.

 

Another OMO auction is expected by the CBN tomorrow, due to a c.N241bn OMO maturity. We consequently expect yields to remain elevated in the secondary market, with market players expected to maintain high bids at the Auction in view of clearing rates at today’s PMA. 

 

NTB PMA Result

Tenor

Rate (%)

Offer (N'bn)

Sub (N'bn)

Sale (N'bn)

91 days

11.00

6.22

3.38

2.65

182 days

12.30

4.00

7.65

4.00

364 days

13.50

126.09

202.34

129.65

 

 

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Oct-18

13.20

12.50

0.20

1-Nov-18

13.50

13.00

0.00

6-Dec-18

13.30

13.10

(0.45)

3-Jan-19

13.50

12.90

0.00

14-Feb-19

13.25

12.85

0.15

14-Mar-19

12.85

12.55

0.00

4-Apr-19

13.25

12.50

0.25

18-Jul-19

13.00

12.50

(0.10)

1-Aug-19

13.40

13.15

0.30

Source: Zedcrest Dealing Desk

 

Money Market

The OBB and OVN rates inched higher in today’s session, closing at 8.33% and 8.92% respectively. This came on the back of continued interventions by the CBN to stabilize rates within the I&E FX market.

 

We expect continued interventions by the CBN to pressure rates higher towards weekend.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

8.33

6.33

Overnight (O/N)

8.92

7.25

Source: FMDQ, Zedcrest Research

 

FX Market

The Naira/USD rate remained stable at the interbank, closing at N306.25/$. At the I&E FX window, a total of $341.57mn was traded in 340 deals, with rates ranging between N330.00/$ - N364.75/$. The NAFEX closing rate depreciated marginally by c.0.01% to N363.10/$ from N363.07/$ previously.

 

At the parallel market, the cash rates fell back by 10k to N359.40/$, while transfer rates remained unchanged at N361.50/$.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.25

306.25

CBN SMIS

359.85

358.87

I&E FX Window

363.10

363.07

Cash Market

359.40

359.30

Transfer Market

361.50

361.50

Source: CBN, FMDQ, REXEL BDC

 

  

Eurobonds

The NGERIA Sovereigns remained relatively flat, with yields ticking slightly higher by c.2bps on average, as investors maintained a slightly bearish bias.

 

The NGERIA Corps were mostly quiet, except for some interests on the ACCESS 21s Sub and slight sell on the FBNNL 21s.

 

 

 Proshare Nigeria Pvt. Ltd.

 

 Proshare Nigeria Pvt. Ltd.

 

Related News

1.       Market Players Risk off T-bills, as CBN Elongates OMO Tenor above the 300day Mark

2.       Ahead of Next T-bills Auction Scheduled for 12th Sept, 2018

3.       Market Players Demand Higher Rates for OMO, as PMA Approaches

4.       CBN Raises OMO Stop Rates, Succumbs to Investor Pressure PMA Holds this Wednesday

5.       Average T-Bills Yield Rose by 15bps to Close the Week at 12.36%

6.       Yields Trend Higher following Hike in CBN OMO Stop Rate

7.       Central Bank makes a U-turn, raises rate to 12.50% for the 182days OMO Bills

8.       System Liquidity support bullish interests in the Fixed Income Markets

9.       External Factors Propel Yields to New Frontiers

10.   Central Bank defies expectations, maintains rates at OMO auction

11.   Bearish Sentiments Persist in Bond Market, amid Bargain Hunting by Local RMCs

12.   Money Market Rate Decreased Marginally Last Week as Overnight Rate Fell to 6.83%

13.   September 2018 FGN Savings Bond Offer for Subscription

14.   Bond Market Closes the Month Bearish as EM Pressures Persist

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