Bond Market opens firmly Bullish as the FGN Launches its $3bn Eurobond Offer to Investors

Culled—Proshare

November 20, 2017/@ZedcrestCapital  

KEY INDICATORS


***Q3 2017 GDP grew by 1.40% Y/Y from 0.72% in Q2***

Inflation 15.91% Declined by 0.07% in October from 15.98% in September 2017
MPR 14.00% Left unchanged at 14.00% at the MPC meeting of September 2017
External Reserves $34.35billion Accreted by 2.04% as at 16th November from $34.33bn on 15th November 2017
Brent Crude $61.88/b Fell by 0.31% from $62.07/b on 16th November 2017

The Bond Market
The Bond market opened the week on a firmly bullish note, with some buys especially on the 2026, 2027 and 2037 bonds taking yields significantly lower by 21bps across the curve. Average bond yields consequently declined to 14.62%, as market players continued to react to news of the planned FGN Eurobond issuance which commenced today, and the positive Q3 2017 GDP result released today by the NBS. We expect the market to remain bullish tomorrow, as market players anticipate renewed offshore and local client interests at the bond auction scheduled for Wednesday.  

Table 1: Benchmark FGN Bond Yields
Description Bid (%) Offer (%) Day Change (%)
16.00 29-Jun-19 14.62 14.55 (0.22)
15.54 13-Feb-20 14.69 14.62 (0.08)
14.50 15-Jul-21 14.66 14.59 (0.39)
16.39 27-Jan-22 14.53 14.46 (0.18)
14.20 14-Mar-24 14.68 14.61 (0.12)
12.50 22-Jan-26 14.70 14.63 (0.32)
16.29 17-Mar-27 14.74 14.67 (0.25)
12.15 18-Jul-34 14.61 14.54 (0.13)
12.40 18-Mar-36 14.57 14.50 (0.16)
16.25 18-Apr-37 14.43 14.36 (0.25)

Source: Zedcrest Dealing Desk

Treasury Bills
The T-bills market traded on a relatively flat note, due to the tight liquidity in the market coming from the OMO T-bill and FX sales by the CBN. Average T-bill yields consequently declined marginally by 5bps to 17.93% as buying interests were constrained by the tight liquidity in the market. We expect yields to be relatively flat tomorrow, due to tight liquidity and high funding rates in the market. 


Table 2:
Benchmark Treasury Bills Rates
Description Bid (%) Offer (%) Day Change (%)
7-Dec-17 16.00 15.75 0.75
4-Jan-18 17.35 17.10 0.85
1-Feb-18 17.40 17.15 (0.20)
1-Mar-18 16.75 16.50 (0.25)
5-Apr-18 17.20 16.95 0.05
3-May-18 17.40 17.15 (0.05)
14-Jun-18 17.40 17.15 (0.35)
5-Jul-18 17.60 17.35 0.35
2-Aug-18 16.75 16.50 0.00
13-Sep-18 15.00 14.75 0.00
4-Oct-18 15.50 15.25 0.00

Source: Zedcrest Dealing Desk 

Table 3: OMO  – 20 November 2017
Tenor Rate (%) Offer (N’bn) Sub (N’bn) Sale (N’bn)
 87 day 16.00 20.00 0.005 0.005
192 day 17.80 40.00 27.66 27.66

Source: CBN 

The Money Market
The OBB and OVN rates rose higher to close today at 38.33% and 41.67%, on the backdrop of the OMO T-bill sales (c.N28bn) and FX interventions by the CBN in the wholesale, SME and invisibles segments of the market estimated at $195m. Market liquidity is consequently estimated to decline to N137billion short from a negative opening figure of N46billion. We expect rates to remain elevated tomorrow, as there are no significant inflows expected in the market.

Table 4: Money Market Rates
Current (%) Previous (%)
Open Buy Back (OBB) 38.33 26.67
Overnight (O/N) 41.67 27.67

Source: FMDQ, Zedcrest Research 

The FX Market
The CBN Official spot rate appreciated slightly by 0.02% to N305.90/$ from its previous day rate of N305.95/$. Its external reserves is also recorded to have improved by 2.04% to $34.35billion as at 16th of November 2017. Rates at the Investors and exporters FX window depreciated to N360.42/$ from N360.40/$ in the previous session. The parallel market also appreciated to N362.00/$ from its previous day rate of N362.50/$. 

Table 5: FX Rates
Current (N/$) Previous ( N/$)
CBN Spot 305.90 305.95
CBN SMIS 330.00 330.00
I&E FX Window 360.42 360.40
Parallel Market 362.00 362.50

Source: CBN, FMDQ, REXEL BDC 

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