Market Players Under-subscribe CBN OMO due to System Liquidity Strain

Culled—Proshare

17/5/2018/Zedcrest Capital

*** Fitch Affirms Nigeria at ‘B+’; Outlook Negative***

Proshare Nigeria Pvt. Ltd.

Bonds

The bond market traded on a mixed note, with yields compressing by c.2bps on average, due to some client flows on the shorter end of the curve, while the medium to long end remained slightly bearish, due to some sell off (mostly offshore) on the 10– and 20-yr. We expect yields to trend lower in the near term as the CBN has shown signs of maintaining a stable level of liquidity and moderate rates in the money market.

Proshare Nigeria Pvt. Ltd.

Treasury Bills

The T-bills market traded with mixed sentiments as market players traded on their OMO auction expectations. The OMO auction by the CBN was well undersubscribed due to the liquidity strain in the system. Consequently, only c.N41bn T-bills were sold of the N300bn offered, while stop rates were maintained at their previous levels. We expect yields to maintain a downtrend, due to the relative ease in system liquidity.

Proshare Nigeria Pvt. Ltd.

Money Market

The OBB and OVN rates crashed to 13.33% and 13.71% respectively. This came on the back of inflows from OMO T-bills and Net PMA repayments (c.N296bn), which helped bolster system liquidity to a net positive position of c.N180bn positive. We expect rates to maintain a downtrend tomorrow, as there are no significant outflows expected.

Proshare Nigeria Pvt. Ltd.

FX Market

The Interbank rate remained stable at its previous rate of N305.80/$, with the CBN’s External reserves posting a 3rd consecutive decline of 0.02%, down to $47.78bn as at 15-May. The NAFEX rate depreciated by 0.12% to N361.22/$, while rates in the Unofficial market remained stable at N362.00/$.

Proshare Nigeria Pvt. Ltd.

Eurobonds:

The NGERIA Sovereigns traded on a relatively flat note, with yields inching slightly higher by c.1bp on average. The 27s and 30s were the most traded and lost about 0.10pt on average.

The NGERIA Corps traded on a mixed note, with gains on the 2021 tickers, while the shorter and longer dated tickers remained largely bearish, save for the FIDBAN 22s which gained about 0.10pt, now trading (102.25/75).

Proshare Nigeria Pvt. Ltd.

 

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