Bond Yields decline on Renewed Demand from Domestic Market Players

Culled—Proshare

November 17, 2017/@ZedcrestCapital

The Bond Market

The bond market ended the week on a bullish note, with renewed demand from local market players taking yields lower by 5bps across the curve. Average bond yields consequently declined to 14.83% from 14.89% in the previous session. We expect yields to trend lower opening next week, as market players anticipate release of Q3 GDP figures and outcome of the MPC meeting.  

Table 1: Benchmark FGN Bond Yields
Description Bid (%) Offer (%) Day Change (%)
16.00 29-Jun-19 14.84 14.77 (0.08)
15.54 13-Feb-20 14.77 14.70 (0.11)
14.50 15-Jul-21 15.05 14.98 (0.03)
16.39 27-Jan-22 14.71 14.64 0.00
14.20 14-Mar-24 14.80 14.73 (0.08)
12.50 22-Jan-26 15.02 14.95 (0.03)
16.29 17-Mar-27 14.99 14.92 (0.04)
12.15 18-Jul-34 14.74 14.67 (0.05)
12.40 18-Mar-36 14.73 14.66 (0.06)
16.25 18-Apr-37 14.68 14.61 (0.06)

Source: Zedcrest Dealing Desk

Treasury Bills
The T-bills market was slightly bearish, with slight sell on some short and medium tenured bills, as some banks tried to generate liquidity to fund for their retail FX bids. Average T-bill yields consequently rose slightly by 9bps to 17.98%. We expect yields to trend slightly higher opening next week, with market liquidity expected to get  tighter on further OMO and FX sales by the CBN. 

Table 2: Benchmark Treasury Bills Rates
Description Bid (%) Offer (%) Day Change (%)
7-Dec-17 15.25 15.00 0.25
4-Jan-18 16.50 16.25 0.60
1-Feb-18 17.60 17.35 0.20
1-Mar-18 17.00 16.75 0.40
5-Apr-18 17.15 16.90 0.00
3-May-18 17.45 17.20 0.00
14-Jun-18 17.75 17.50 (0.05)
5-Jul-18 17.25 17.00 0.05
2-Aug-18 16.75 16.50 0.45
13-Sep-18 15.00 14.75 0.00
4-Oct-18 15.50 15.25 0.00

Source: Zedcrest Dealing Desk  

The CBN sold a total of N121million (97-day) and N65.90billion (216-day) bills at its OMO auction today, with rates maintained at 16% and 17.80% respectively.
 

Table 3: OMO  – 17 November 2017
Tenor Rate (%) Offer (NBn) Sub (N’bn) Sale (N’bn)
 97 day 16.00 30.00 0.121 0.121
216 day 17.80 70.00 65.90 65.90

Source: CBN 

The
Money Market

The OBB and OVN rates spiked to 26.67% and 27.67% from 7% levels in the previous session. This was on the backdrop of the OMO T-bill and retail SMIS by the CBN. Market liquidity is consequently estimated to close at N101bn negative, from a positive opening figure of N165billion. We expect rates to trend higher on Monday, due to expected OMO and wholesale SMIS by the CBN.

Table 4: Money Market Rates
Current (%) Previous (%)
Open Buy Back (OBB) 26.67 6.17
Overnight (O/N) 27.67 6.67

Source: FMDQ, Zedcrest Research

The FX Market
The CBN Official spot rate remained stable at its previous day rate of N305.95/$. Its external reserves is also recorded to have improved by 2.04% to $34.33billion as at 15th of November 2017. Rates at the Investors and exporters FX window depreciated to N360.40/$ from N359.56/$ in the previous session. The parallel market however remained stable at its previous day rate of N362.50/$. 

Table 5: FX Rates
Current (N/$) Previous ( N/$)
CBN Spot 305.95 306.00
CBN SMIS 330.00 330.00
I&E FX Window 359.56 360.42
Parallel Market 362.50 362.50

Source: CBN, FMDQ, REXEL BDC 

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