Short Tenor T-Bills Rally following Rise in System Liquidity


November 5, 2018/Zedcrest Capital

***Nigeria Braces for Nationwide Strike Over 66% Minimum-Wage Hike Demand***


Indicator Value Commentary
Inflation 11.28% As at October 16, 2018, 5bps up from 11.23% recorded in August 2018.
MPR 14.00% Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting
External Reserves $41.91bn As at November 2, 2018. A c.0.10% decrease from $41.95bn on November 1, 2018
Brent Crude $73.73pb As at November 5, 2018. A c.1.28% decrease from $72.80pb on November 2, 2018


Bond yields compressed by c.7bps in today’s session, as risk off sentiments moderated slightly on the longer end of the curve. We also witnessed some interests on the shorter end of the curve (20s & 21s), due to the signifcantly robust system liqudity levels.

Despite occasional pullbacks, the overall market trend is expected to remain bearish, due to expectations for a further uptrend in monthly inflation and for sustained higher yield levels in the T-bills market.

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
15.54 13-Feb-20 14.54 14.15 0.00
14.50 15-Jul-21 15.41 15.15 (0.28)
16.39 27-Jan-22 15.06 14.56 0.09
14.20 14-Mar-24 15.31 15.18 (0.03)
12.50 22-Jan-26 15.59 15.45 (0.06)
16.29 17-Mar-27 15.55 15.42 (0.07)
13.98 23-Feb-28 15.74 15.66 (0.04)
12.15 18-Jul-34 15.71 15.61 (0.19)
12.40 18-Mar-36 15.61 15.48 (0.08)
16.2499 18-Apr-37 15.42 15.34 (0.08)

Source: Zedcrest Dealing Desk  

Treasury Bills

The Tbills market was dominated by interests on the shorter end of the curve, mostly on the Nov maturities, due to the significantly buoyant level of liquidity in the system. Market players were however slightly bearish on the longer end of the curve, due to expectations for continued OMO auctions at more attractive yield levels. 

We expect the market to be relatively flat in the coming days, with some profit taking expected on the some of the shorter tenured bills which have been rallied to single digit levels.

Benchmark FGN Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
6-Dec-18 11.50 11.10 (0.60)
3-Jan-19 12.75 12.40 0.00
14-Feb-19 12.60 12.50 (0.15)
14-Mar-19 12.65 12.10 (0.15)
4-Apr-19 12.75 12.25 0.00
18-Jul-19 13.00 12.70 0.00
1-Aug-19 13.95 13.40 0.00
12-Sep-19 14.35 14.25 0.00
3-Oct-19 14.40 14.25 0.05

Source: Zedcrest Dealing Desk 

Money Market

In line with our expectations, the OBB and OVN rates moderated by c.1pct to 3.08% and 3.58%, as system liquidity remained significantly robust following inflows from the CBN in the previous session.

Barring a significant liquidity mop up by the CBN, system liquidity which opened the week at c.950bn is expected to remain significantly robust for the most part of the week. Funding rates are consequently expected to remain stable at single digit levels.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 3.08 4.08
Overnight (O/N) 3.58 4.83

Source: FMDQ, Zedcrest Research  

FX Market

At the Interbank, the Naira/USD spot rate depreciated by c.0.02% to N306.65/$ (spot), while the SMIS rate remained unchanged at N361.45/$. However, at the I&E FX window the NAFEX closing rate appreciated by c.0.03% to N363.64/$ from N364.74/$ previously.

At the parallel market segment, the cash rates remained unchanged at N361.00/$, while the transfer rates depreciated by 50k to N364.50/$.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.65 306.60
CBN SMIS 361.45 361.45
I&E FX Window 363.64 363.74
Cash Market 361.00 361.00
Transfer Market 364.50 364.00



The NGERIA Sovereigns traded relatively flat on the day, with yields rising marginally higher by c.2bps, following slight sell mostly on the Jul 2023.               

In the NGERIA Corps, clients showed slight interests on the DIAMBK 19s, while selloffs were seen on the FIDBAN 22s, which lost c.0.30pct (in price terms) on the day.

Proshare Nigeria Pvt. Ltd.

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