Apex Bank attempts to manage excess system liquidity with early OMO Auction


November 7, 2018/Zedcrest Capital

***Diamond Bank Eurobond prices drop by c.500bps following S&P downgrade***


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 $71.62pb As at November 6, 2018. A c.2.86% decrease from $73.73pb on November 5, 2018


The FGN Bond market traded on a relatively quiet note today as risk-off sentiments remained across the entire yield curve. We saw more sellers on bonds today especially on the 2028s and 2034s bond maturities with low demand to match. The general expectation for an uptick in inflation figures and T-bills yields later this year continues to support a risk neutral approach for bonds in the near term.

Consequently, we expect the market to be order driven as market participants’ maintain a cautious outlook on bond yields.

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
15.54 13-Feb-20 14.45 14.19 (0.09)
14.50 15-Jul-21 15.27 15.12 (0.14)
16.39 27-Jan-22 15.13 14.41 0.07
14.20 14-Mar-24 15.31 15.16 0.00
12.50 22-Jan-26 15.60 15.43 0.01
16.29 17-Mar-27 15.65 15.41 0.10
13.98 23-Feb-28 15.77 15.67 0.03
12.15 18-Jul-34 15.79 15.64 0.08
12.40 18-Mar-36 15.68 15.46 0.07
16.2499 18-Apr-37 15.40 15.34 (0.02)

Source: Zedcrest Dealing Desk 

Treasury Bills

Activities in the T-bills market was muted today as the CBN conducted an unexpected OMO auction, a divergence from the usual OMO T-bills maturity vs OMO auction trend in past sessions. We saw slight bearish sentiments on the short end of the curve, while the medium to long end of the curve traded flat due to more supply of OMO T-bills.

The CBN sold a total of N316.23Bn OMO T-bills across three maturities, 121-, 184- and 338-days, while maintaining stop rates at 11.50%, 13.00% and 14.50% respectively. We expect the market to trade with bearish sentiments due to continuous OMO auctions and subsequent retail FX sales expected later this week. 

OMO Auction Results
Tenor Rate (%) Offer (N’bn) Sub (N’bn) Sale (N’bn)
121-day 11.50 50.00 0.21 0.21
184-day 13.00 150.00 77.37 73.30
338-day 14.50 300.00 245.22 242.72


Benchmark FGN Treasury Bills

Description Bid (%) Offer (%) Day Change (%)
6-Dec-18 12.50 11.95 1.00
3-Jan-19 12.80 12.25 0.05
14-Feb-19 12.70 12.40 0.10
14-Mar-19 12.80 12.00 0.15
4-Apr-19 12.75 12.25 0.00
18-Jul-19 13.00 12.70 0.00
1-Aug-19 13.50 13.00 (0.45)
12-Sep-19 14.35 14.25 0.00
3-Oct-19 14.50 14.25 0.10

Source: Zedcrest Dealing Desk 

Money Market

Money market rates inched up by c.100bps to close at 4.83% and 5.42% for OBB and OVN rates respectively, as the CBN sold N316.23Bn OMO T-bills in a bid to manage excess system liquidity . We expect CBN to remain aggressive with their liquidity mop-up exercise as system liquidity remains robust closing the day at c.N483bn. Funding rates are consequently expected to oscillate in tandem with the level of liquidity in the system.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 4.83 3.08
Overnight (O/N) 5.42 3.58

Source: FMDQ, Zedcrest Research 

FX Market

At the Interbank, the Naira/USD spot and SMIS rates remained unchanged to close at N306.65/$ and N361.45/$ respectively. However, at the I&E FX window, the NAFEX closing rate appreciated by c.0.03% to N363.54/$ from N364.64/$ previously.

At the parallel market segment, the cash and transfer rates remained unchanged at N361.00 and N364.50/$ respectively.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.65 306.65
CBN SMIS 361.45 361.45
I&E FX Window 363.54 363.64
Cash Market 361.00 361.00
Transfer Market 364.50 364.50



The NGERIA Sovereigns posted relatively little gains as sentiment for sovereigns in Sub-Saharan Africa space improved following positive news from Mozambique and Zimbabwe. Yields consequently rose marginally by c.2bps.               

The main highlight of today’s  trading session centered on DIAMBK 19s, with yields rising by a whopping c.600bps from the previous days close in reaction to the short- and long-term issuer credit rating downgrade of Diamond Bank PLC to ‘CCC+/C’ by S&P Global Ratings. The bond traded around 25.00%-27.00% levels with more local buyers taking advantage of the high yield despite the recent downgrade.

Other NGERIA Corps showed positive investor sentiment, as Zenith 19s, Access Sub-21s and SEPLLN 23s also posted average gains of c.0.30pct (in yield terms) on the day.

Proshare Nigeria Pvt. Ltd.

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