Bond Market opens relatively quiet as Liquidity Tightens in the Tbills Market

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November 7, 2017/@ZedcrestCapital 

Key Macro-Economic Indicators

Inflation 15.98% Declined marginally by 0.02% in September from 16.01% in August 2017
MPR 14.00% Left unchanged at 14.00% at the MPC meeting of September 2017
External Reserves $33.93billion Accreted by 2.05% as at 3rd November from $33.89bn on 2nd November
Brent Crude $62.34/b Appreciated by 0.43%

Sources: NBS,CBN 

The Bonds Market
The bond market opened the week on a relatively quiet note with only few trades totaling N1.7billion executed on four maturities. Some buys on the 2027 and 2037 maturities however pushed yields slightly lower by an average of 1bps across the curve. We expect yields to decline slightly tomorrow, with some more client demand expected on the long end of the curve. 

Table 1: Benchmark FGN Bonds Yields as at Nov. 6, 2017
Description Bid (%) Offer (%) Day Change (%)
16.00 29-Jun-19 15.10 15.03 (0.01)
15.54 13-Feb-20 15.02 14.95 0.00
14.50 15-Jul-21 15.13 15.06 0.00
16.39 27-Jan-22 14.76 14.69 (0.01)
14.20 14-Mar-24 15.05 14.98 (0.01)
12.50 22-Jan-26 15.07 15.00 0.00
16.29 17-Mar-27 15.04 14.97 0.00
12.15 18-Jul-34 14.76 14.69 (0.05)
12.40 18-Mar-36 14.74 14.67 (0.04)
16.25 18-Apr-37 14.77 14.70 (0.02)

Sources: FMDQ, Zedcrest Research   

Treasury Bills
The T-bills market was also scantily traded today, due to the tight liquidity in the market. Market players however bought some short tenured bills, in anticipation of a decline in yields due to expected inflows of N233.76bn in OMO maturities later in the week. The medium to long end of the curve traded flat, as the CBN conducted another OMO T-bill sale of N25.46bn 185-day bill at 17.80% and N32million 94-day bill at 16%. We expect yields to decline slightly tomorrow, with market players expected to cherry pick some of the high yielding bills in the market. 

Table 2: Benchmark Treasury Bills Rates as at Nov. 6, 2017 

Description Bid (%) Offer (%) Day Change (%)
7-Dec-17 19.10 18.85 0.00
4-Jan-18 17.80 17.55 0.00
1-Feb-18 17.60 17.35 0.00
1-Mar-18 17.60 17.35 0.00
5-Apr-18 17.70 17.45 0.05
3-May-18 17.70 17.45 0.45
14-Jun-18 17.85 17.60 0.00
5-Jul-18 17.00 16.75 0.00
2-Aug-18 16.20 15.95 0.00
13-Sep-18 16.00 15.75 0.00
4-Oct-18 15.65 15.40 0.05

Sources: FMDQ, Zedcrest Research

Table 3: OMO Auction Result – 6 November 2017
Tenor Rate (%) Offer (NBn) Sub (N’bn) Sale (N’bn)
 94 day 16.00 20.00 0.032 0.032
185 day 17.80 40.00 25.46 25.46

Sources: FMDQ, Zedcrest Research   

The Money Market
The OBB and OVN rates closed today at 37.50% and 38.92%, relatively unchanged from its previous day’s levels, as the tight liquidity in the market was sustained by an OMO T-bill sale and FX interventions by the CBN in the wholesale, SME and Invisibles segment of the market estimated at $195million. System Liquidity is consequently estimated to close today at c.N100bn short from a negative opening figure of N75bn, due to debits for the OMO T-bill sale for today. We expect rates to close slightly higher tomorrow, as the CBN is expected to debit banks for today’s SMIS and continue with its regular OMO auctions in the market. 

Table 4: Money Market Rates
Current (%) Previous (%)
Open Buy Back (OBB) 37.50 36.33
Overnight (O/N) 38.92 39.42

Sources: CBN, Zedcrest Research

The FX Market
The CBN Official spot rate remained stable its previous day rate of N305.90/$, as the CBN intervened in the Interbank market to the tune of $195million in the wholesale, SME and Invisibles segments of the market. Rates at the Investors and Exporters FX window closed at N360.05/$ from N360.57/$ in the previous session, while the parallel market rate appreciated by 0.03% to close at N361.20/$


Table 5: FX Rates
Current (N/$) Previous ( N/$)
CBN Spot 305.90 305.90
CBN SMIS 330.00 330.00
I&E FX Window 360.05 360.57
Parallel Market 361.20 361.30

Sources: FMDQ, CBN, Bloomberg, Rexel BDC, Zedcrest research

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Whilst proper and reasonable care has been taken in the preparation and accuracy of the facts and figures presented in this report, no responsibility or liability is accepted by Zedcrest Capital or its employees for any error, omission or opinion expressed herein. This report is not an investment research or a research recommendation and should not be regarded as such. The information provided herein is by no means intended to provide a sufficient basis on which to make an investment decision.