Market Players Selloff Bills above 14% as CBN extends OMO offer to the 1-year


September 14, 2018/Zedcrest Capital

***Single Currency: No Member Country has Met Convergence Criteria*** – WAMI


Indicator Value Commentary
Inflation 11.14% As at August15, 2018,9bps down from 11.23% recorded in June 2018.
MPR 14.00% Next MPC meeting scheduled for September 24 & 25, 2018
External Reserves $45.28bn As atSeptember 10, 2018. A c.0.07% decrease from $45.31bnon Sept. 9, 2018
Brent Crude $78.42pb As at September13, 2018. A c.1.43% decreasefrom$79.56pbon Sept. 12, 2018


Despite the relatively scanty trading in the bond market, yields closed c.12bps higher d/d, as market players became increasingly cautious following developments in the T-bills market.  We saw yields break the 15.50% mark on the long end of the curve, for the second time this week, with investors also selling off on the 2-year bond up to c.14.69%. Although there was still slight interest around the mid tenors, their yields expanded by c.8bps avg., with most trades done closer to c.15.20% from c.15.10% previously.

We expect this uptrend to persist, as sentiments remain weak in view of the expected flattening in inflation results which are expected tomorrow, coupled with the continued spike in short term T-bill rates. 

Secondary Market Bonds
Description Bid (%) Offer (%) Day Change (%)
15.54 13-Feb-20 14.85 14.37 0.48
14.50 15-Jul-21 15.37 15.17 0.14
16.39 27-Jan-22 15.23 15.00 0.09
14.20 14-Mar-24 15.17 15.13 0.02
12.50 22-Jan-26 15.26 15.19 0.08
16.29 17-Mar-27 15.28 15.18 0.10
13.98 23-Feb-28 15.29 15.19 0.08
12.15 18-Jul-34 15.52 15.38 0.09
12.40 18-Mar-36 15.56 15.40 0.12
16.2499 18-Apr-37 15.50 15.34 0.04

Source: Zedcrest Dealing Desk 

Treasury Bills

Yields in the T-bills spacehave now risen by about 170bps from their closing levels in the previous week. The latest development being the hike on the 364-day bill to c.13.50% at yesterday’s PMA and a consequent floatation of the same bill by the CBN in today’s session. The aforementioned forced market players to selloff bills across the curve, with most of the short to mid-tenured maturities sold above the 14% mark, while the longer tenured bills, though scantily traded are now all bided at c.14.00%.

The CBN failed to make a Sale at today’s OMO auction, as market players bided above the regulator’s expectations, while demand remained very weak. We expect a possible return to the market by the CBN, with market players still expected to maintain high bids at the auction. Yields are consequently expected to remain elevated in the secondary market. 

OMO  – 13 September 2018
Tenor Rate (%) Offer (N’bn) Sub (N’bn) Sale (N’bn)
119 days Nil 50.00 2.55 No Sale
189 days Nil 100.00 6.12 No Sale
364 days Nil 200.00 100.36 No Sale

Secondary Market Treasury Bills

Description Bid (%) Offer (%) Day Change (%)
4-Oct-18 15.00 14.00 1.80
1-Nov-18 15.00 14.00 1.50
6-Dec-18 15.00 14.00 1.70
3-Jan-19 14.60 13.50 1.10
14-Feb-19 14.00 12.80 0.75
14-Mar-19 14.00 12.80 1.15
4-Apr-19 14.00 13.00 0.75
18-Jul-19 14.00 12.50 1.00
1-Aug-19 14.00 12.50 0.60

Source: Zedcrest Dealing Desk 

Money Market

Following a decline of c.N300bn in system liquidity week to date as published by the CBN, the OBB and OVN rates finally rose above its long sustained single digit levels to 10.33% and 11.02% respectively. This was mostly due to interventions by the CBN to stabilize rates within the FX market.

System liquidity is however expected to have rebounded to c.N500bn as at close of business today, coming on the back of inflows from OMO T-bill maturities and Retail FX refunds. We however expect rates to remain pressured due to expected outflows for another retail FX auction and a likely OMO intervention by the CBN.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 10.33 8.33
Overnight (O/N) 11.08 8.92

Source: FMDQ, Zedcrest Research 

 FX Market

The Naira/USD rate remained stable at the interbank, closing at N306.25/$. At the I&E FX window, a total of $850.96mn was traded in 303deals, with rates ranging between N358.00/$ – N364.50/$. The NAFEX closing rate appreciatedby c.0.09% to N362.78/$ from N363.10/$ previously.

At the parallel market, the cashrates depreciated further by 30k to N359.70/$, while transfer ratesremained unchanged at N361.50/$.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.25 306.25
CBN SMIS 359.85 359.85
I&E FX Window 362.78 363.10
Cash Market 359.70 359.40
Transfer Market 361.50 361.50



We witnessed renewed interests in the NGERIA Sovereigns, as yields moderated by c.8bps across the curve. We however note that sentiments remain weak amid continued EM pressures.

The NGERIA Corpswere mixed, with interests seen on the ACCESS 21s Sub & Snr, and slight sell on the DIAMBK 19s.

Proshare Nigeria Pvt. Ltd.

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