CBN Holds Off on OMO Sale as Funding Rates Moderate

Culled—Proshare

February 12, 2019/Zedcrest Capital

***Oil Jumps As Saudis Plan Further Production Cuts***

KEY INDICATORS

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% Left Unchanged for the 15th Consecutive Time at the Jan. 22, 2019 MPC Meeting
External Reserves $42.90bn As at February 11, 2019. A c.0.12% decrease from $42.95bn on February 8, 2019
Brent Crude $62.55pb As at February 12, 2019. A c.0.97% increase from $61.95pb on February 11, 2019

Bonds

The Bond market traded on a slightly bearish note on the back of continued profit taking mostly on the 2028s, while bids got weaker across the curve, as market sentiments dampened in anticipation of the February Bond auction scheduled to hold next week.

We expect yields to remain slightly bearish into the new week, with possibility for a further uptick in yields closer to the 15% mark.

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
15.54 13-Feb-20 14.98 14.16 (0.06)
14.50 15-Jul-21 14.99 14.58 0.00
16.39 27-Jan-22 14.87 14.33 (0.02)
14.20 14-Mar-24 14.59 14.19 0.03
12.50 22-Jan-26 14.73 14.55 (0.01)
16.29 17-Mar-27 14.75 14.58 (0.02)
13.98 23-Feb-28 14.82 14.77 (0.11)
12.15 18-Jul-34 14.65 14.53 (0.04)
12.40 18-Mar-36 14.68 14.59 (0.06)
16.2499 18-Apr-37 14.51 14.39 (0.06)

Source: Zedcrest Dealing Desk 

Treasury Bills

The T-bills market remained slightly bearish on the back of the liquidity squeeze in the money market which caused yields to tick marginally higher by c.5bps on the day. The CBN also floated a further OMO auction with market players bidding for c.N22bn of the N65bn offered. The CBN however held off on sales, most likely due to the significant funding constraints in the system.

The CBN will conduct an NTB Auction on behalf of the FG tomorrow, with c.N154bn of the 91, 182 and 364-day bills on offer. Given expectations by market players for continued OMO auctions by the CBN, we do not expect any significant changes in stop rates from previous levels.

NTB Auction Expectations
Tenor Offer (N’bn) Expected Rate (%) Previous Rate (%)
91 days 3.38 10.90 – 11.20 11.00
182 days 10.00 13.40 – 13.70 13.50
364 days 140.00 14.90 – 15.20 15.00

Source: Zedcrest Research

 

Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
14-Feb-19 12.30 12.00 0.30
14-Mar-19 12.50 11.25 0.50
4-Apr-19 11.50 11.25 0.15
2-May-19 12.00 11.00 0.50
13-Jun-19 13.00 12.00 0.00
18-Jul-19 12.95 12.65 0.00
1-Aug-19 14.50 14.25 0.00
12-Sep-19 14.80 14.50 0.00
3-Oct-19 14.95 14.75 0.05
14-Nov-19 14.95 14.70 0.00
5-Dec-19 15.00 14.90 0.05
2-Jan-20 15.00 14.90 0.00

Source: Zedcrest Dealing Desk 

Money Market

Rates in the money market moderated by c.20pct as banks were able to access the CBN’s SLF window to fund their obligations, while the CBN also held off on a further OMO sale in a bid to alleviate the significant funding pressures in the system. The OBB and OVN rates consequently ended the session at 24.17% and 27.50% respectively.

We expect rates to remain elevated tomorrow, as there are no significant inflows expected.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 24.17 43.33
Overnight (O/N) 27.50 47.50

Source: FMDQ, Zedcrest Research 

FX Market

At the Interbank, the Naira/USD rate depreciated by 0.02% to N306.75/$ at the spot market, while the SMIS rate remained unchanged at N357.10/$. The NAFEX rate in the I&E window however appreciated by c.0.02% to N361.87/$. At the parallel market, the cash rate depreciated by c.0.28% to N360.00/$ while the transfer rate remained unchanged at N365.00/$.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.75 306.70
CBN SMIS 357.10 357.10
I&E FX Window 361.87 361.95
Cash Market 360.00 359.00
Transfer Market 365.00 365.00

Source: CBN, FMDQ, REXEL BDC 

Eurobonds

Renewed interests in the NGERIA Sovereigns push yields lower by c.14bps, with the rally mostly fostered by the positive gains in oil market following plans by the Saudi Government to implement further production cuts.

In the NGERIA Corps, investors remained slightly bearish on the UBANL 22s, whilst yields remained relatively flat on other tickers.

Proshare Nigeria Pvt. Ltd.

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