CBN Delivers Further Cut to Stop Rate in c.N400bn OMO Sale

Culled—Proshare

March 14, 2019/ Zedcrest Capital

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KEY INDICATORS

Indicator Value Commentary
Inflation 11.37% As at February 15, 2019. A c.7bps decline from 11.44% recorded in December 2018
MPR 14.00% Left Unchanged for the 15th Consecutive Time at the Jan. 22, 2019 MPC Meeting
External Reserves $42.87bn As at March 12, 2019. A c.0.12% increase from $42.82bn on March 11, 2019
Brent Crude $67.83pb As at March 14, 2019. A c.0.74% increase from $67.33pb on March 13, 2019

Bonds

The FGN Bond Market traded with mixed sentiments, with slight sell on the 2023s and 2027s towards the close of trading pushing yields marginally higher by c.5bps on the day. Demand however remained relatively firm on the 2028 bond.

We expect yields to remain relatively stable, with declining T-bill yields expected to support demand interests in the near term. 

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
14.50 15-Jul-21 14.65 14.26 0.00
16.39 27-Jan-22 14.61 14.31 0.02
12.75 27-Apr-23 14.67 14.43 0.23
14.20 14-Mar-24 14.46 13.94 0.04
13.53 23-Mar-25 14.71 14.31 0.14
12.50 22-Jan-26 14.40 14.26 (0.04)
16.29 17-Mar-27 14.45 14.27 0.09
13.98 23-Feb-28 14.31 14.33 (0.02)
12.15 18-Jul-34 14.34 14.11 0.09
12.40 18-Mar-36 14.26 14.13 0.01
16.2499 18-Apr-37 14.20 14.09 0.00

Source: Zedcrest Dealing Desk 

Treasury Bills

The T-bills market remained bullish on the back of the signifcant downtrend in rates at the previous day’s NTB auction. Buying interests were mostly focused on the long end of the curve which remained absent at the OMO auction conducted by the CBN today.

Of the c.N213bn OMO bills that matured today, the CBN sold a total of c.N400bn 91 and 175-day bills in a bid to mop up the excess liquidity in the system. Due to the oversubcription at the auction compared to the N350bn offered, the CBN cut the OMO stop rates further by c.6bps on the 91-day to 11.84% and by c.24bps on the 175-day to 13.20%.

We expect rates to remain relatively stable, with market players expected to sustain demand amid a further decline in the OMO clearing rates. We however expect slight selloff on the shortend of the curve, as market players fund for the CBN’s bi-mothly retail FX auction tomorrow. 

OMO  Auction Result
Tenor Rate (%) Offer (N’bn) Sub (N’bn) Sale (N’bn)
91 day 11.84 50.00 62.05 50.75
175 day 13.20 300.00 367.45 349.73

Source: CBN 

Benchmark Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
4-Apr-19 12.50 9.00 0.00
2-May-19 11.50 10.00 0.00
13-Jun-19 12.00 11.00 0.40
18-Jul-19 12.70 11.95 0.00
1-Aug-19 12.10 11.85 (0.10)
12-Sep-19 13.20 12.95 (0.10)
3-Oct-19 13.40 13.10 0.05
14-Nov-19 13.15 13.05 (0.25)
5-Dec-19 13.15 13.00 (0.20)
2-Jan-20 12.90 12.75 (0.10)
6-Feb-20 12.80 12.65 (0.15)

Source: Zedcrest Dealing Desk 

Money Market

Rates in the money market inched slightly higher by c.2pct on the back of the significant OMO sale by the CBN which compressed system liquidity to c.N160bn from c.N300bn opening the day. The OBB and OVN rates consequently ended the session at 10.67% and 11.58% respectively.

We expect rates to trend higher tomorrow, as banks fund for a retail FX auction by the CBN.

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 10.67 9.42
Overnight (O/N) 11.58 10.00

Source: FMDQ, Zedcrest Research 

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (Spot) and N356.92/$ (SMIS). The NAFEX closing rate in the I&E window however weakened slightly by 0.02% to N360.36/$. At the parallel market, the cash rate remained unchanged at N358.00/$, while the transfer rate strengthened by 0.27% to N364.00/$.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.95 306.95
CBN SMIS 356.92 356.92
I&E FX Window 360.36 360.29
Cash Market 358.00 358.00
Transfer Market 364.00 365.00

Source: CBN, FMDQ, REXEL BDC 

Eurobonds

The NGERIA Sovereigns turned bullish in today’s session following sustained gains in oil prices. Yields were consequently lower by c.3bps, with the most demand witnessed on the 2038s.

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

Proshare Nigeria Pvt. Ltd.

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