Bond Yields Retrace Slightly, as Demand Pressures Wane


January 18, 2019/Zedcrest Capital

***Minimum wage: FG to review revenue sharing formula***


Indicator Value Commentary
Inflation 11.44% As at January 16, 2019. A c.16bps increase from 11.28% recorded in November 2018
MPR 14.00% MPC Meeting to be held on the 21st and 22nd  of January 2019
External Reserves $43.10bn As at January 17, 2019. A c.0.00% decrease from $43.11bn on January 16, 2019
Brent Crude $62.68pb As at January 18, 2019. A c.2.62% increase from $61.08pb on January 17, 2018



The Bond market traded on a quieter note in today’s session, with yields retracing by c.5bps avg. from its previous day’s rally.

In the coming week we expect coupons worth c.N79bn to be paid on the 2022 and 2030 maturity. Whilst this might still spur some client demand, we expect market players to be relatively cautious, with the DMO expected to release the Q1 bond calendar next week. Yields are consequently expected to close marginally higher w-o-w as market players position for the bond auction likely to hold in the last week of the month.

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
15.54 13-Feb-20 15.09 14.82 0.11
14.50 15-Jul-21 15.32 15.07 0.03
16.39 27-Jan-22 15.05 14.90 0.00
14.20 14-Mar-24 15.15 15.06 0.03
12.50 22-Jan-26 15.41 15.23 (0.02)
16.29 17-Mar-27 15.07 14.97 0.12
13.98 23-Feb-28 15.41 15.10 0.24
12.15 18-Jul-34 15.24 15.01 0.04
12.40 18-Mar-36 15.17 15.03 (0.03)
16.2499 18-Apr-37 15.19 15.33 0.02

Source: Zedcrest Dealing Desk  

Treasury Bills

The T-bills market closed the week on a relatively flat note, with market players remaining slightly well bid on the longer end of the curve in absence of an OMO auction by the CBN. The CBN however conducted a retail FX auction which mopped up most of the inflows from Retail FX refunds and Net OMO/PMA repayments in the previous session, consequently moderating buying interests in the market.

We expect yields to remain relatively stable in the coming week on the back of the slightly improved system liquidity levels.

Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
14-Feb-19 14.05 13.50 (0.15)
14-Mar-19 14.05 12.00 0.05
4-Apr-19 14.05 13.90 0.05
2-May-19 13.00 12.75 0.00
13-Jun-19 13.20 12.85 0.00
18-Jul-19 13.20 12.50 0.30
1-Aug-19 14.50 13.75 0.00
12-Sep-19 14.90 14.30 0.15
3-Oct-19 15.00 14.75 0.10
14-Nov-19 14.85 14.60 0.05
5-Dec-19 14.90 14.75 0.00

Source: Zedcrest Dealing Desk  

Money Market

Rates in the money market trended slightly higher as banks funded for the retail FX intervention by the CBN. The OBB and OVN rates consequently closed the day at 15.33% and 16.17% respectively.

We expect rates to trend slightly higher opening next week, with the CBN expected to resume its weekly wholesale FX interventions.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 15.33 13.00
Overnight (O/N) 16.17 13.50

Source: FMDQ, Zedcrest Research  

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.85/$(spot) and N357.97/$ (SMIS). The NAFEX rate in the I&E window fell slightly by c.0.02% to N362.79/$, with total traded volumes also moderating to c.$406m. Rates at the parallel market eased slightly, with the cash rate and transfer rates dropping by 0.06% and 0.14% to N361.00/$ and N365.00/$ respectively.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.85 306.85
CBN SMIS 357.97 357.97
I&E FX Window 362.79 362.70
Cash Market 361.00 361.20
Transfer Market 365.00 365.50



The NGERIA Sovereigns rallied to YTD highs in today’s session, on the bank of a rebound in oil prices. Yields declined by c.15bps on the day, with the NGERIA 49s breaking a 9% support on the long end of the curve, having gained c.2pct in price terms on the day.

The NGERIA Corps were relatively quiet except for slight interests on the FBNNL 21s and Zenith 22s.

Proshare Nigeria Pvt. Ltd.

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