Yields Compress Marginally, with Interests on the Short Tenors


October 11, 2018/Zedcrest Capital

***FG proposes N24,000 minimum wage***


Indicator Value Commentary
Inflation 11.23% As at September14, 2018,9bps up from 11.14% recorded in July 2018.
MPR 14.00% Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting
External Reserves $43.52bn As atOctober9, 2018. A c.0.21% decrease from $43.61bnon October8, 2018
Brent Crude $83.39pb As at October 10, 2018. A c.1.64% decreasefrom$84.78pbon October 9, 2018


The bond market remained relatively quiet, with yields compressing marginally by c.1bp following slight interests witnessed on the shorter end of the curve (21s & 22s). Investors also showed interests for the 2025s, whilst we saw better offers on the longer end of the curve, with yields ticking higher by c.6bps on the 2037s.

We expect the market to remain largely order driven in the near term, with clients expected to remain attracted to the higher yielding bonds +15% offers. Market players are however expected to maintain a short bias on the auction bonds. 

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
15.54 13-Feb-20 13.97 13.60 0.04
14.50 15-Jul-21 14.93 14.47 (0.04)
16.39 27-Jan-22 14.40 13.69 (0.10)
14.20 14-Mar-24 15.01 14.79 0.00
12.50 22-Jan-26 14.83 14.78 0.02
16.29 17-Mar-27 15.15 14.99 0.00
13.98 23-Feb-28 15.21 15.13 0.00
12.15 18-Jul-34 15.20 15.16 (0.04)
12.40 18-Mar-36 15.20 15.05 (0.05)
16.2499 18-Apr-37 15.11 14.95 0.06

Source: Zedcrest Dealing Desk  

Treasury Bills

The T-bills market remained relatively quiet in today’s session, with slight bullish sentiments observed on the short end of the curve (Oct – Jan), but with some more profit taking witnessed on the longer end of the curve (Sept/Oct) in anticipation of the OMO auction tomorrow.

We expect the CBN to conduct an OMO auction tomorrow to mop up inflows (c.N277bn) from maturing bills. We consequently expect the market to maintain a slightly bearish posture, even as market players anticipate a significant draw-down in system liquidity via a retail FX auction on Friday. 

Benchmark FGN Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
1-Nov-18 13.00 12.85 (0.15)
6-Dec-18 12.75 12.60 (0.35)
3-Jan-19 12.40 12.20 (0.10)
14-Feb-19 12.85 12.65 0.20
14-Mar-19 13.00 12.40 0.00
4-Apr-19 12.35 12.20 (0.15)
18-Jul-19 13.15 12.50 0.15
1-Aug-19 13.20 12.65 0.20
12-Sep-19 13.25 13.00 0.15

Source: Zedcrest Dealing Desk 

Money Market

The OBB and OVN rates remained relatively stable, closing today at 9.67% and 10.17% as system liquidity remained buoyant at c.N190bn positive. The slight decline in system liquidity from c.N240bn in the previous session came on the back of outflows for the wholesale FX auction, which had already been provided for on Monday.

We expect rates to remain stable, barring a significant OMO sale tomorrow.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 9.67 9.17
Overnight (O/N) 10.17 10.00

Source: FMDQ, Zedcrest Research  

FX Market

At the Interbank, the Naira/USD rate remained stable at N306.45/$ (spot) and N361.34/$ (SMIS). At the I&E FX window a total of $285.05mn was traded in 455 deals, with rates ranging between N350.00/$ – N365.00/$. The NAFEX closing rate remained unchanged at N364.27/$.

At the parallel market, the cash and transfer rates remained unchanged at N360.00/$ and N363.00/$ respectively.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.45 306.45
CBN SMIS 361.34 361.34
I&E FX Window 364.27 364.27
Cash Market 360.00 360.00
Transfer Market 363.00 363.00



The NGERIA sovereigns opened the day on a slightly positive note, but gave up gains later in the day, with yields closing c.5bps higher d/d. We witnessed the most losses on the 2038s which lost c.0.40pct in price terms.                                                                                            

The NGERIA Corps were conversely bullish, with the most interests seen on the shorter dated tickers. The DIAMBNK 19s continued to post gains, whilst we also saw good buyers in the GRTBNL 18s, Zenith 19s and FBNNL 21s.

Proshare Nigeria Pvt. Ltd.

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