Bond Yields Decline on Renewed Buying Interests

Culled—Proshare

November 13, 2017/@ZedcrestCapital

The Bond Market

The bond market opened the week on a slightly bullish note, with demand especially on the 2024 (-5bps) and 2036 (-5bps) bonds.  The 2027 bond was however the most traded with yield compressing slightly by 3bps. Average bond yields consequently declined by 4bps to 14.99% as market players maintained a positive outlook on the market. We expect yields to trend slightly lower tomorrow due to renewed interest on bonds at current levels.

Table 1: FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
16.00 29-Jun-19 15.21 15.14 (0.03)
15.54 13-Feb-20 14.88 14.81 (0.08)
14.50 15-Jul-21 15.08 15.01 (0.06)
16.39 27-Jan-22 14.73 14.66 (0.05)
14.20 14-Mar-24 14.95 14.88 (0.05)
12.50 22-Jan-26 15.09 15.02 (0.05)
16.29 17-Mar-27 15.20 15.13 (0.03)
12.15 18-Jul-34 14.92 14.85 (0.02)
12.40 18-Mar-36 14.92 14.85 (0.05)
16.25 18-Apr-37 14.96 14.89 (0.01)

Source: Zedcrest Dealing Desk

Treasury Bills
The T-bills market opened the week on a relatively quiet note, as market players continued to pour their demand into the OMO auction by the CBN. The CBN sold a total of N4bn 94-day and N61.73bn 185-day bills at 16% and 17.80% respectively. We however witnessed some buying interests on some Dec-17 (-295bps) and Apr-18 (-60bps) bills, as the average T-bills yields declined by 13bps to 18.06%. We expect the market to be slightly bullish tomorrow, ahead of the Primary market auction scheduled for Wednesday. 

Table 2: Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
7-Dec-17 17.00 16.75 0.00
4-Jan-18 17.20 16.95 0.00
1-Feb-18 17.75 17.50 0.25
1-Mar-18 17.60 17.35 0.00
5-Apr-18 17.10 16.85 (0.40)
3-May-18 17.40 17.15 0.00
14-Jun-18 17.85 17.60 0.00
5-Jul-18 17.00 16.75 0.00
2-Aug-18 16.70 16.45 0.00
13-Sep-18 16.30 16.05 0.00
4-Oct-18 15.90 15.65 0.00

Source: Zedcrest Dealing Desk 

Table 3: OMO – 11 November 2017
Tenor Rate (%) Offer (NBn) Sub (N’bn) Sale (N’bn)
 94 day 16.00 20.00 4.00 4.00
185 day 17.80 80.00 61.73 61.73

Source: CBN


The Money Market

The OBB and OVN rates rose by c.11% to 17.83% and 19.75% due to the combined effect of the OMO T-bill sales (N65.73bn) and Wholesale SMIS by the CBN ($100m). System Liquidity is however estimated to close on a positive note due to cash inflows from retail FX refunds by the CBN which came in after market close. We consequently expect rates to trend lower tomorrow.

Table 4: Money Market Rates
Current (%) Previous (%)
Open Buy Back (OBB) 17.83 7.17
Overnight (O/N) 19.75 7.75

Source: FMDQ, Zedcrest Research

The FX Market
The CBN Official spot rate depreciated by 0.02% to N306.00/$ from its previous day rate of N305.95/$. This is following the CBN’s intervention in the market to the tune of $100million via a Wholesale SMIS. Its external reserves is however recorded to have improved by 2.04% to $34.16billion as at 10th of November.

Rates at the Investors and exporters FX window appreciated to N360.20/$ from N360.40/$ in the previous session. The parallel market rate however stayed unchanged at N361.20/$.

FX Market
Current (N/$) Previous ( N/$)
CBN Spot 306.00 305.95
CBN SMIS 330.00 330.00
I&E FX Window 360.20 360.40
Parallel Market  361.20 361.20

Source: FMDQ, REXEL BDC

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