Yields Trend Higher following Hike in CBN OMO Stop Rate

Proshare

Friday, September 07, 2018 /09:26PM / Zedcrest Capital

***CBN injects $303m, CNY 46.58m into forex market***

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

$45.51bn

As at September 5, 2018. A c.0.17% decrease from $45.55bn on Sept. 4, 2018

Brent Crude

$76.15pb

As at September 7, 2018. A c.0.10% decrease from $76.23pb on Sept. 6, 2018

 

 

Bonds

The Bond market remained largely order driven, with selloffs witnessed mostly on the shorter end of the curve, in reaction to the hike in longest tenor OMO stop rate to c.13.30% eff. yield by the CBN in the previous session. Yields consequently rose higher by c.15bps across the curve, with the most selloff seen on the Jul 2021 and Jan 2022 maturities.

 

In the coming week, we expect yields to maintain an upward trend, as market players maintain a relatively risk off stance in tune with recent developments in short term interest rates.

 

 

Secondary Market Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.47

13.92

0.21

14.50 15-Jul-21

15.30

14.96

0.30

16.39 27-Jan-22

15.01

14.82

0.39

14.20 14-Mar-24

15.29

14.95

0.22

12.50 22-Jan-26

15.30

15.22

0.07

16.29 17-Mar-27

15.25

15.10

0.03

13.98 23-Feb-28

15.23

15.12

0.06

12.15 18-Jul-34

15.49

15.28

0.13

12.40 18-Mar-36

15.40

15.28

0.05

16.2499 18-Apr-37

15.42

15.22

0.06

Source: Zedcrest Dealing Desk

  

Treasury Bills

In tune with the recent hike in stop rates at the last OMO auction by the CBN, the T-bills market traded on a significantly bearish note, with yields rising by c.80bps on average across the curve. We witnessed the most selloffs on the shorter dated maturities (sept – Dec), while market players were relatively more moderate in their selloff on the mid to long end of the curve.

 

In the coming week, we expect market players to remain cautious, despite the significantly buoyant level of system liquidity at c.N540bn positive. Barring continued offshore selloff, we expect some retracement, especially on the shorter dated maturities.

 

 

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Oct-18

12.50

11.25

1.40

1-Nov-18

12.15

11.90

0.90

6-Dec-18

12.50

12.10

0.95

3-Jan-19

12.50

12.35

0.70

14-Feb-19

12.65

12.50

0.40

14-Mar-19

12.60

12.45

0.50

4-Apr-19

12.60

12.40

0.35

18-Jul-19

12.55

12.10

0.20

Source: Zedcrest Dealing Desk

 

 

Money Market

Following a net OMO repayment of c.N100bn in the previous session, the OBB and OVN rates declined further to 2.83% and 3.42% respectively, as the market remained awash with liquidity at c.N540bn positive.

 

We expect rates to remain moderated in the coming week, barring a significant increase in the spate of OMO interventions by the CBN. We however expect rates to close higher w/w as the CBN is expected to conduct its bi-weekly Retail FX auction on Friday.

 

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

2.83

3.00

Overnight (O/N)

3.42

3.83

Source: FMDQ, Zedcrest Research

FX Market

The Naira/USD rate remained stable at the interbank, closing at N306.20/$. At the I&E FX window, a total of $249.84mn was traded in 293 deals, with rates ranging between N350.00/$ - N364.50/$. The NAFEX closing rate depreciated marginally by c.0.01% to N362.78/$ from N362.73/$ previously.

 

At the parallel market, the cash and transfer rates appreciated by 10k and 50k to close at N359.40/$ and N361.50/$ respectively.

 

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.20

306.20

CBN SMIS

358.87

358.87

I&E FX Window

362.78

362.73

Cash Market

359.40

359.50

Transfer Market

361.50

362.00

Source: CBN, FMDQ, REXEL BDC

  

Eurobonds

The NGERIA Sovereigns maintained its bullish recovery in today’s session, with yields compressing further by c.12bps across the curve. This came on the back of a slowdown in the intense EM selloffs witnessed earlier in the week.  We witnessed the most gains today on the Feb 2032s, which gained about 1.15pct on the day. Yields however closed weaker by c.5bps w/w.

 

The NGERIA Corps were conversely bearish, with the most selloff witnessed on the DIAMBK 19s and FIDBAN 22s, consequently reversing some of the earlier gains on the tickers.

 

 

 Proshare Nigeria Pvt. Ltd.

 

 Proshare Nigeria Pvt. Ltd.

 

Related News

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