Bond Market Trades Flat, Despite Inflation Dip

Culled—Proshare

March 15, 2019/Zedcrest Capital

***Nigeria’s Inflation drops to 11.31% in February 2019*** – NBS

KEY INDICATORS

Indicator Value Commentary
Inflation 11.31% As at March 15, 2019. A c.6bps decline from 11.37% recorded in January 2019
MPR 14.00% Left Unchanged for the 15th Consecutive Time at the Jan. 22, 2019 MPC Meeting
External Reserves $42.98bn As at March 14, 2019. A c.0.12% increase from $42.93bn on March 13, 2019
Brent Crude $66.98pb As at March 15, 2019. A c.1.25% decrease from $67.83pb on March 14, 2019

Bonds

The FGN Bond Market traded on a relatively flat note, with no active trades recorded during the session, even as market reaction to the inflation release by the NBS remained relatively muted.

Despite the c.N91bn expected in coupon payments in the coming week, we expect yields to remain relatively flat, as market players look forward to the FGN bond auction scheduled to hold in the last week of the month.

Benchmark FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
14.50 15-Jul-21 14.73 14.21 0.08
16.39 27-Jan-22 14.58 14.39 (0.03)
12.75 27-Apr-23 14.62 14.46 (0.05)
14.20 14-Mar-24 14.37 13.96 (0.09)
13.53 23-Mar-25 14.61 14.32 (0.10)
12.50 22-Jan-26 14.43 14.27 0.03
16.29 17-Mar-27 14.44 14.25 (0.01)
13.98 23-Feb-28 14.34 14.24 0.03
12.15 18-Jul-34 14.34 14.18 0.00
12.40 18-Mar-36 14.26 14.15 0.00
16.2499 18-Apr-37 14.21 14.11 0.01

Source: Zedcrest Dealing Desk 

Treasury Bills

The T-bills market traded on a relatively quiet note, as demand interests were dampened by funding pressures from the Retail FX auction by the CBN. Yields were consequently higher by c.10bps on the day.

We expect the market to remain stable in the near term, as the CBN is expected to maintain its spate of OMO issuances to control excess system liqudity when necessary. We also expect the relatively robust demand interests for T-bills to be sustained in the coming week.

Benchmark Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
4-Apr-19 13.00 9.00 0.50
2-May-19 11.40 10.00 (0.10)
13-Jun-19 11.65 11.45 (0.35)
18-Jul-19 12.50 11.90 (0.20)
1-Aug-19 12.10 11.85 0.00
12-Sep-19 13.20 13.00 0.00
3-Oct-19 13.20 13.10 (0.20)
14-Nov-19 13.25 13.00 0.10
5-Dec-19 13.20 13.10 0.05
2-Jan-20 13.00 12.75 0.10
6-Feb-20 12.75 12.60 (0.05)

Source: Zedcrest Dealing Desk 

Money Market

Rates in the money market were relatively unchanged from previous levels as refunds from a prior retail FX sale moderated funding pressures from the retail FX auction by the CBN today. The OBB and OVN rates consequently ended the session at 11.17% and 11.67% respectively, with system liquidity estimated to close the week at c.N100bn positive.

We expect rates to trend slightly higher opening next week, due to expected outflows for a weekly wholesale FX sale by the CBN

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 11.17 10.67
Overnight (O/N) 11.67 11.58

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 appreciated by 0.02% to N360.18/$, while the cash and transfer rates at the parallel market remained unchanged at N358.00/$ and N364.00/$ respectively.

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 306.95 306.95
CBN SMIS 356.92 356.92
I&E FX Window 360.18 360.36
Cash Market 358.00 358.00
Transfer Market 364.00 364.00

Source: CBN, FMDQ, REXEL BDC  

Eurobonds

The NGERIA Sovereigns remained slightly bullish, with yields compressing further by c.3bps on the day. We witnessed the most interests on the 2032s, which gained c.1pct on the day.

In the NGERIA Corps, we witnessed slight sell on the ECOTRA 21s and ZENITH 22s.

Proshare Nigeria Pvt. Ltd.

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