Funding rates Crash below 5% as CBN Holds off on OMO ahead of Sallah Break

Culled—Proshare

June 14, 2018/Zedcrest Capital

*** FX Cash rates hit new high of N360/$ as CBN sustains interventions to BDCs***

*** External Reserves Recover by $200m in one Week***

KEY INDICATORS

Inflation 11.61% Declined by 0.87% in May from 12.48% in April 2018
MPR 14.00% Left unchanged at 14.00% at the MPC meeting 0n 4 April 2018
External Reserves $47.63billion Rose by 0.42% as at 13 June from $47.43bn as at 7 June 2018
Brent Crude

   

$76.12pb Fell by 0.39% from $76.42pb on 13 June 2018

 Bonds

The bond market traded on a relatively quiet note, with yields ticking slightly higher by c.2bps on average, mostly driven by client flows on the medium to long end of the curve. We witnessed selling interests on the 28s and 36s, whilst there was some cherry-picking on the 2034 bonds. We expect the market to remain slightly bearish, with yields expected to tick slightly higher, especially on the longer end of the curve. 

FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
16.00 29-Jun-19 11.94 11.58 (0.01)
15.54 13-Feb-20 12.81 12.31 (0.03)
14.50 15-Jul-21 13.41 13.31 0.04
16.39 27-Jan-22 13.19 13.09 0.03
14.20 14-Mar-24 13.32 13.12 0.07
12.50 22-Jan-26 13.45 13.38 (0.03)
16.29 17-Mar-27 13.35 13.30 0.03
13.98 23-Feb-28 13.49 13.33 0.17
12.15 18-Jul-34 13.61 13.56 (0.06)
12.40 18-Mar-36 13.63 13.54 0.03
16.2499 18-Apr-37 13.59 13.48 0.02

Source: Zedcrest Dealing Desk  

Treasury Bills

The T-bills Market traded on a slightly bullish note with yields trending lower by c.12bps across the curve. This came as the CBN failed to conduct an OMO auction to mop up excess inflows of c.N244bn from maturing OMO treasury bills. We expect  yields to trend slightly higher opening next week, as the CBN is expected to conduct an OMO auction to Mop up the excess liquidity in the System.

Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
5-Jul-18 12.00 11.85 (1.00)
2-Aug-18 13.00 12.05 0.80
13-Sep-18 12.50 11.00 0.50
4-Oct-18 12.25 12.10 0.00
1-Nov-18 12.30 12.20 0.10
6-Dec-18 12.30 12.10 0.05
3-Jan-19 12.15 12.05 (0.10)
14-Feb-19 12.45 10.00 0.25
14-Mar-19 12.45 10.00 0.20
4-Apr-19 12.45 10.00 0.20

Source: Zedcrest Dealing Desk

Money Market

The OBB and OVN rates crashed significantly by c.11pct to 3.67% and 4.25%, as system liquidity rose significantly higher to c.N380bn est, on the back of inflows from maturing OMO bills. We expect rates to trend higher upon resumption from the Sallah break as the CBN is expected to conduct an OMO auction to mop up the excess system liquidity.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 3.67 15.17
Overnight (O/N) 4.25 15.67

Source: FMDQ, Zedcrest Research 

FX Market

The Interbank rate appreciated by 0.02% to N305.85/$ from its previous rate of N305.90/$. This was following a recovery in the CBN’s external reserves by c.$200m to $47.63bn as at 13-Jun from $47.43bn as at 7-Jun. The I&E FX rate remained relatively stable at N361.07/$. In the parallel market, cash rates appreciated further by 70k to a high of N360.00/$, while the transfer market rate remained stable at N364.00/$.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 305.85 305.90
CBN SMIS 330.00 330.00
I&E FX Window 361.07 361.10
Cash Market 360.00 360.70
Transfer Market 364.00 364.00

Source: CBN, FMDQ, REXEL BDC

Eurobonds:

The NGERIA Sovereigns look to have bottomed out from the intense bearish pressures witnessed in the build up to the US FED rate hike decision, as yields compressed by c.10bps due to some cherry-picking by investors across the curve. The 2038s and 2047s were the most lifted rising by slightly more than a point form their previous day lows.

The NGERIA Corps however remained in the reverse, with investors still bearish on most of the bonds. We witnessed the most selloffs on the Access 21s Snr, which has now risen by c.109bps (-2.70pt) w/w.  The Zenith 22s and GRTBNL 18s however posted marginal gains, with yields compressing by c.2bps.

Proshare Nigeria Pvt. Ltd.

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