Inter-Bank FX Rate hits Ytd High of N306.00 Per $ Amid CBN’s wholesale interventions

Culled—Proshare

19/2/2018/Zedcrest Capital

***Reps demand N800bn supplementary budget for fuel marketers***


KEY INDICATORS

Inflation 15.13% Declined by 0.24% in January from 15.37% in December 2017
MPR 14.00% Left unchanged at 14.00% at the MPC meeting of November 2017
External Reserves $41.54billion Accreted 1.71% as at 14 February from $41.47bn as at 13 February 2018
Brent Crude $65.29pb Rose by 0.71% from $64.83pb on 16 February 2018

Bonds

The bond market was scantily traded in today’s session, with slight sell witnessed on some long tenured bonds. This consequently lifted yields marginally upwards by c.4bps across the curve. We expect another quiet trading session tomorrow, as market players position themselves ahead of the FGN Bond auction slated for Wednesday, with N50bn of the 2021 and N50bn of a 2028 (new issue) bond on offer.  

Benchmark FGN Bond Yields
Description Bid (%) Offer (%) Day Change (%)
16.00 29-Jun-19 14.07 14.00 0.08
15.54 13-Feb-20 14.10 14.03 0.06
14.50 15-Jul-21 13.71 13.64 0.05
16.39 27-Jan-22 13.59 13.52 (0.01)
14.20 14-Mar-24 13.70 13.63 0.03
12.50 22-Jan-26 13.76 13.69 0.00
16.29 17-Mar-27 13.82 13.75 0.04
12.15 18-Jul-34 13.46 13.39 0.02
12.40 18-Mar-36 13.40 13.33 0.04
16.25 18-Apr-37 13.42 13.35 0.08

Source: Zedcrest Dealing Desk 
Treasury Bills

The T-bills market traded on a relatively flat note, even as average yields stayed unchanged at c.15.51%. This came on the backdrop of a further squeeze in system liquidity coming from the Wholesale FX sales by the CBN. The CBN issued a No-sale OMO result despite moderate subscriptions for the medium tenured bill offered. We expect the market to remain relatively stable at these levels tomorrow, due to the tight system liquidity. This is however barring a further hold on OMO issuance which could fuel some bullish sentiments amongst market players.

Benchmark Treasury Bills Rates
Description Bid (%) Offer (%) Day Change (%)
5-Apr-18 15.35 15.20 0.05
3-May-18 14.80 14.65 0.00
14-Jun-18 14.60 14.45 (0.10)
5-Jul-18 14.40 14.25 (0.10)
2-Aug-18 14.35 13.45 0.00
13-Sep-18 14.65 14.50 0.00
4-Oct-18 14.55 14.40 (0.05)
1-Nov-18 14.50 14.35 0.00
3-Jan-19 13.75 13.60 0.00
14-Feb-19 13.65 13.50 0.00

Source: Zedcrest Dealing Desk

OMO Auction Result
Tenor Rate (%) Offer (NBn) Sub (N’bn) Sale (N’bn)
101 day Nil 10.00 0.002 Nil
262 day Nil 50.00 46.26 Nil

Money Market
The OBB and OVN rates rose to 25.17% and 26.67% respectively. This came on the backdrop of the squeeze in Naira liquidity coming from the FX interventions by the CBN. System Liquidity is consequently estimated to close at c.N40bn positive from a c.N100bn opening figure. We expect rates to remain elevated at these levels, as there are no significant inflows expected into the system tomorrow.  

Money Market Rates
Current (%) Previous (%)
Open Buy Back (OBB) 25.17 18.17
Overnight (O/N) 26.67 19.50

Source: FMDQ, Zedcrest Research

FX Market

The CBN Official spot rate depreciated by 0.02% to N306.00/$, marking its highest level recorded this year. This came amid the CBN’s usual Intervention of c.$210mn in the wholesale, SME and invisibles segment of the market.

The spot rate in the Investors and Exporters’ FX Window appreciated by 0.02% to close at N360.28/$ from N360.36/$ in the previous session.

Rates in the Unofficial market appreciated significantly by 0.14% to N360.80/$, consequently marking its lowest level for the year and its closest level to the I&E market rate. 

FX Rates
Current (N/$) Previous ( N/$)
CBN Spot 306.00 305.95
CBN SMIS 330.00 330.00
I&E FX Window 360.28 360.36
Parallel Market 360.80 361.20

Source: CBN, FMDQ, REXEL BDC   

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