FGN Eurobond Yields Trend Higher as Presidency Seeks Approval for New Issue

Culled—Proshare

October 9, 2018/Zedcrest Capital

***Buhari seeks NASS approval for $2.78bn Euro bonds***

KEY INDICATORS

Indicator Value Commentary
Inflation 11.23% As at September14, 2018,9bps up from 11.14% recorded in July 2018.
MPR 14.00% Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting
External Reserves $43.61bn As atOctober8, 2018. A c.0.52% decrease from $43.84bnon October5, 2018
Brent Crude $84.78pb As at October 9, 2018. A c.2.18% increasefrom$82.97pbon October 8, 2018

Bonds

The bond market traded on a relatively flat note in today’s session, with slight buying interests seen on the 26s and 37s, whilst we saw better sellers of the 36s. Yields consequently compressed marginally by c.1bp on average.

We expect yields to remain relatively stable in the near term, as the market remains largely driven by client interests. We however expect yields to trend higher towards month end, as market players price in expectations for renewed supply of bonds at the next FGN Bond Auction. 

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
15.54 13-Feb-20 13.93 13.64 0.00
14.50 15-Jul-21 14.97 14.56 0.00
16.39 27-Jan-22 14.50 13.69 0.00
14.20 14-Mar-24 15.01 14.80 (0.01)
12.50 22-Jan-26 14.81 14.70 (0.05)
16.29 17-Mar-27 15.15 14.97 0.00
13.98 23-Feb-28 15.21 15.13 0.00
12.15 18-Jul-34 15.24 15.12 (0.01)
12.40 18-Mar-36 15.25 15.01 0.05
16.2499 18-Apr-37 15.05 14.95 (0.06)

Source: Zedcrest Dealing Desk  

Treasury Bills

The T-bills market remained scantily traded, with yields compressing marginally by c.5bps on average. We however noted some profit taking on the longer end of the curve, in anticipation of another OMO auction on Thursday.

We expect some more profit taking activities and slight selloff as market players reposition ahead of the OMO auction expected by the CBN on Thursday.  

Benchmark FGN Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
1-Nov-18 13.15 12.75 0.15
6-Dec-18 13.10 12.65 0.10
3-Jan-19 12.50 12.15 (0.25)
14-Feb-19 12.65 12.50 (0.25)
14-Mar-19 13.00 12.40 0.30
4-Apr-19 12.50 12.25 0.00
18-Jul-19 13.00 12.35 0.00
1-Aug-19 13.00 12.50 0.00
12-Sep-19 13.10 12.80 (0.15)

Source: Zedcrest Dealing Desk  

Money Market

The OBB and OVN rates remained relatively stable, closing today at 9.17% and 10.00% as system liquidity remained buoyant at c.N244bn positive.

We expect rates to remain stable, with no significant outflows expected tomorrow.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 9.17 9.50
Overnight (O/N) 10.00 10.58

Source: FMDQ, Zedcrest Research  

FX Market

At the Interbank, the Naira/USD rate remained stable at N306.40/$ (spot) and N361.34/$ (SMIS). At the I&E FX window a total of $106.40mn was traded in 252 deals, with rates ranging between N358.00/$ – N365.00/$. The NAFEX closing rate appreciated by c.0.09% to N364.27/$ from N364.61/$ previously.

At the parallel market, the cash rate depreciated by 30k to N360.00/$, while the transfer rate remained stable at N363.00/$.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.45 306.45
CBN SMIS 361.34 361.34
I&E FX Window 364.27 364.61
Cash Market 360.00 359.70
Transfer Market 363.00 363.00

Source: CBN, FMDQ, REXEL BDC 

Eurobonds

The NGERIA sovereigns maintained its recent bearish trend, with yields surging by c.8bps following moves by the Federal Govt to obtain approval for a fresh $2.78bn capital raise from the international market. We witnessed the most selloff on the 30-yr which lost c.1.50pct in price terms.

                                                                                         

The NGERIA Corps were mostly quiet, except for slight interests seen on the DIAMBK 19s, which gained c.0.30pct on the day.

Proshare Nigeria Pvt. Ltd.

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