Offshore Demand Keeps T-bill Yields Moderated as Funding Rates Soar


January 21, 2019/Zedcrest Capital

***IMF Lowers Nigeria’s 2019 Growth Projection to 2%***


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 $43.11bn As at January 18, 2019. A c.0.01% decrease from $43.10bn on January 17, 2019
Brent Crude $62.48pb As at January 21, 2019. A c.0.32% decrease from $62.68pb on January 18, 2018


The Bond market remained slightly bearish opening the week, with yields expanding by c.7bps on average following slight selloff on the 20s and 27s. We also noticed slightly improved offers on the short and mid tenors.

We expect this trend to persist, as market players anticipate release of the Q1 FGN Bond Calendar by the DMO. We also expect the CBN to reiterate its hawkish monetary stance at its MPC meeting scheduled for tomorrow, where the MPR is expected to be held at 14% alongside other monetary parameters.

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
15.54 13-Feb-20 15.51 15.14 0.42
14.50 15-Jul-21 15.40 15.24 0.08
16.39 27-Jan-22 15.09 14.90 0.04
14.20 14-Mar-24 15.21 15.04 0.06
12.50 22-Jan-26 15.36 15.14 (0.05)
16.29 17-Mar-27 15.18 15.06 0.11
13.98 23-Feb-28 15.40 15.21 (0.01)
12.15 18-Jul-34 15.30 15.10 0.06
12.40 18-Mar-36 15.10 14.99 (0.07)
16.2499 18-Apr-37 15.21 14.96 0.02

Source: Zedcrest Dealing Desk 

Treasury Bills

The T-bills market remained slightly bullish despite the significant squeeze in system liquidity via an OMO (c.N180bn) and wholesale FX intervention (c.$210m) by the CBN. The c.10bps decline in yields is largely attributed to offshore interests mostly around the short tenors (Feb/Mar), with some demand also seen on the Sep – Dec maturities.

Despite the resurgent interests from offshore investors as evidenced in the increased volumes in the I&E FX market, we expect T-bill yields to remain slightly elevated, due to the regular OMO interventions by the CBN.

Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
14-Feb-19 14.05 13.50 0.00
14-Mar-19 14.05 12.00 0.00
4-Apr-19 14.05 13.40 0.00
2-May-19 12.90 12.50 (0.10)
13-Jun-19 13.30 13.00 0.10
18-Jul-19 13.50 13.30 0.30
1-Aug-19 13.75 13.55 (0.75)
12-Sep-19 14.90 14.25 0.00
3-Oct-19 14.90 14.50 (0.10)
14-Nov-19 14.70 14.45 (0.15)
5-Dec-19 14.90 14.65 0.00

Source: Zedcrest Dealing Desk 

Money Market

Rates in the money market trended significantly higher by c.10pct, due to the OMO and FX interventions by the CBN which is estimated to have compressed system liquidity to c.N100bn Negative from a positive opening level of c.N270bn. The OBB and OVN rates consequently closed the day at 25.33% and 27.17% respectively.

We expect funding rates to moderate slightly tomorrow, as banks would be able to access the CBN’s SLF window to fund their obligations.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 25.33 15.33
Overnight (O/N) 27.17 16.17

Source: FMDQ, Zedcrest Research 

FX Market

At the Interbank, the Naira appreciated marginally by c.0.02% to N306.80/$ at the spot market, while the SMIS rate remained unchanged at N357.97/$. The NAFEX rate in the I&E window also appreciated marginally by c.0.09% to N362.49/$, while total traded volumes moderated by c.7.46% to c.$375m.  At the parallel market the cash and transfer rates remained unchanged at N361.00/$ and N365.00/$ respectively.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.80 306.85
CBN SMIS 357.97 357.97
I&E FX Window 362.46 362.79
Cash Market 361.00 361.00
Transfer Market 365.00 365.00



The NGERIA Sovereigns maintained a slightly bullish posture, with yields compressing further by c.7bps, despite the lighter traded volumes on the back of the US MLK holiday.

The NGERIA Corps were also relatively quiet, with no significant changes in yields on the day.

Proshare Nigeria Pvt. Ltd.

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