Bond Yields Taper as CBN holds off on OMO

Culled—Proshare

March 16, 2018/Zedcrest Capital 

*** Nigeria Raises April Qua Iboe Selling Price to 19-Month High***

Proshare Nigeria Pvt. Ltd.

Bonds

The Bond market closed the week on a relatively calm note with very little in the way of flows, except for slight buys on the 2034s, consequently reversing some of the selloff witnessed on the bond in the previous session. Yields however declined by c.10bps on average, as market players re-adjusted from the intense bearish pressures witnessed in the previous session. We expect renewed buy sentiments in the coming week as market players would be looking to take some positions ahead of next week’s bond auction, coupled with expectations of c.N86bn in bond coupon payments on the 2027 and 2036 bonds on Monday. We however note that support for yields seem to be largely around the 13.50% area and we do not see yields trending significantly below this level in the near term, unless there is a significant change in the CBN’s liquidity management approach in terms of its regular OMO issuances.

Proshare Nigeria Pvt. Ltd.

Treasury Bills

The T-bills market traded on a relatively flat note on the back of a further squeeze in net system liquidity, following outflows for retail FX bids by banks. We however noticed some client demand especially on the recently issued OMO bill, as the CBN did not conduct an OMO auction. We expect yields to be relatively calm in the coming week, barring a significant shift in OMO issuance by the CBN.

Proshare Nigeria Pvt. Ltd.

Money Market

The OBB and OVN rates rose to 11.83% and 12.92% respectively on the back of outflows estimated at N300bn for retail FX funding by banks. System liquidity is consequently estimated to close at c.N167bn positive, from a positive opening figure of N467bn. We expect rates to be relatively stable on Monday, with inflows from bond coupon payments, expected to offset outflows for Wholesale FX sales by the CBN. This is however barring a significant OMO sale by the CBN.

Proshare Nigeria Pvt. Ltd.

FX Market

The Interbank rate remained stable at its previous rate of N305.75/$, with the CBN’s external reserves also recorded to have improved by 1.59% to $44.47bn as of 15 March. The NAFEX rate depreciated by 0.14% to close at N360.57/$. Rates in the Unofficial market remained stable at N361.20/$.

Proshare Nigeria Pvt. Ltd.

Eurobonds

The NGERIA Sovereigns traded on a relatively flat note in today’s session. We witnessed buying interests on the 27s, 32s and 47s, while investors were bearish on the 30s and 38s. The yield curve consequently inched slightly higher by 1bp on average.

The Nigerian Banks were slightly active with some buys on the FBNNL 20s, Zenith 19s, GRTBNL 18s and FIDBAN 22s. We however witnessed slight sell on the Zenith 22s and FBNNL 21s.

In the coming week, we expect some buying interest on the shorter end of the NGERIA Curve.

Proshare Nigeria Pvt. Ltd.

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