Bond Market Bounces Back from Previous Day Selloff

Culled—Proshare

August 8, 2018/Zedcrest Capital

***DMO to Sell N90bn FGN Bonds Next Wednesday***

KEY INDICATORS

Indicator Value Commentary
Inflation 11.23% As at July 23, 2018, 38bps down from 11.61% recorded in May 2018.
MPR 14.00% Next MPC meeting scheduled for September 24 & 25, 2018
External Reserves $46.81bn As atAugust 7, 2018. A c.0.13% decreasefrom $46.87bn as at August 6, 2018.
Brent Crude $71.83pb As at August 9, 2018. A c.3.45% decreasefrom$74.40pb as atAugust 8, 2018

Bonds

The Bond market regained a relatively calm posture in today’s session with yields retracing by c.28bps on average, as market players cherry-picked on the 2027s which was sold off significantly higher in the previous session. We also witnessed slight interests on the longer end of the curve (37s especially), with yields averaging c.14.20% on that end.

The DMO has released its Bond offer Circular for the month of August, with a total of c.N90bn of the 3, 5 and 10yr bonds on offer for sale at an auction scheduled to hold on the 15th of August. This has consequently kept yields slightly elevated on the mid-end of the curve (28s especially), and we expect this trend to remain relatively unchanged ahead of the auction.

FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
15.54 13-Feb-20 13.57 12.95 (0.08)
14.50 15-Jul-21 13.72 13.57 (0.55)
16.39 27-Jan-22 14.11 13.77 (0.02)
14.20 14-Mar-24 13.81 13.68 (0.65)
12.50 22-Jan-26 14.24 14.15 (0.51)
16.29 17-Mar-27 14.23 14.18 (0.19)
13.98 23-Feb-28 14.40 14.35 (0.07)
12.15 18-Jul-34 14.26 14.17 (0.24)
12.40 18-Mar-36 14.24 14.20 (0.39)
16.2499 18-Apr-37 14.24 14.15 (0.14)

Source: Zedcrest Dealing Desk 

Treasury Bills

Activities in the T-bills Market remained largely focused on the shorter end of the curve, with the longer end relatively quiet due to expectations of an OMO auction by the CBN to counter excess inflows from c.N452bn Maturing OMO T-bills tomorrow. Yields trended lower by c.10bps in tune with the relatively buoyant level of liquidity in the system.

We expect the market to be scantily traded tomorrow, with interests expected to be largely dominated by the expected OMO Auction. Yields should consequently tick slightly higher on average.

 

Secondary Market Treasury Bills

Description Bid (%) Offer (%) Day Change (%)
13-Sep-18 10.50 10.35 (0.80)
4-Oct-18 10.40 10.00 0.35
1-Nov-18 11.45 11.20 0.25
6-Dec-18 11.95 11.75 (0.05)
3-Jan-19 12.05 11.95 (0.05)
14-Feb-19 12.10 12.00 0.00
14-Mar-19 11.95 11.80 (0.05)
4-Apr-19 12.00 11.25 (0.10)
18-Jul-19 11.35 10.80 (0.05)

Source: Zedcrest Dealing Desk 

Money Market

The OBB and OVN rates remain relatively unchanged, closing today at 7.75% and 8.54% respectively. System Liquidity has however declined slightly to c.N230bn positive, due to outflows for wholesale FX settlement in the previous session.

We expect rates to trend slightly lower tomorrow, with inflows from OMO maturities (c.N452bn) expected to further bolster system liquidity. 

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 7.75 7.58
Overnight (O/N) 8.54 8.42

Source: FMDQ, Zedcrest Research

FX Market

The Naira remained stable at N306.00/$at the interbank market. It however appreciatedby 0.06% at the I&E FX window, closing at N362.08/$ (from N362.30/$ previously).At the parallel market, the cash and transfer market rates remained stable atN358.50/$ and N361.50/$ respectively.

Oil prices trended significantly lower today, with Brent crude futures crashing by c.$2.57cents to $71.83pb, following reports of an increase in US crude inventories by the API. The CBN’s External reserves has also maintained a steady decline, falling by c.0.13% to $46.81bn as at 7-Aug, from $46.87bn on the 6thof August.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.00 306.00
CBN SMIS 330.00 330.00
I&E FX Window 362.08 362.30
Cash Market 358.50 358.50
Transfer Market 361.50 361.50

Source: CBN, FMDQ, REXEL BDC

Eurobonds

The NGERIA Sovereignsremained bearish in today’s session, with yields rising further by c.8bps on average. We witnessed the most selloff on the Feb 2030 which rose by c.11bps (-0.75pct) d/d.

Activities in the NGERIA Corpswere relatively quiet, with slight interests seen on the UBANL 22s and FIDBAN 22s, while investors were slightly bearish on most of the other traded bonds, with some pullback seen on the FBNNL 21s and Access 21s Sub.

Proshare Nigeria Pvt. Ltd.

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