Culled—Proshare
18/12/2017/@ZedcrestCapital
*** CBN calms anxiety in T-bills market with renewed OMO intervention***
***Headline Inflation drops by 1bp to 15.90% in November***
KEY INDICATORS
| Inflation | 15.90% | Declined by 0.01% in November from 15.91% in October 2017 |
| MPR | 14.00% | Left unchanged at 14.00% at the MPC meeting of November 2017 |
| External Reserves | $36.85billion | Accreted 1.92% as at 14th December from $36.72 as at 13th December 2017 |
| Brent Crude | $62.96pb | Fell by 0.41% from $63.22pb on 14th December 2017 |
Bonds
The bond market opened today on a weaker note following the OMO auction announcement by the CBN for the first time this month, coupled with a weak inflation result from the NBS. We however saw prices strengthen over the course of trading, with the 2027 and 2037s bonds in particular closing about N1.00 above their opening market prices. Average bond yields however rose significantly by 42bps due to the initial bearish sentiments, especially on the short end of the curve. We expect yields to retrace slightly downwards tomorrow, with some demand expected at these levels.
| Table 1: Benchmark FGN Bond Yields | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 16.00 29-Jun-19 | 14.82 | 14.75 | 0.78 |
| 15.54 13-Feb-20 | 14.61 | 14.54 | 0.60 |
| 14.50 15-Jul-21 | 14.41 | 14.34 | 0.77 |
| 16.39 27-Jan-22 | 14.23 | 14.16 | 0.33 |
| 14.20 14-Mar-24 | 14.41 | 14.34 | 0.51 |
| 12.50 22-Jan-26 | 14.41 | 14.34 | 0.35 |
| 16.29 17-Mar-27 | 14.28 | 14.21 | 0.41 |
| 12.15 18-Jul-34 | 14.20 | 14.13 | 0.18 |
| 12.40 18-Mar-36 | 14.00 | 13.93 | 0.17 |
| 16.25 18-Apr-37 | 13.98 | 13.91 | 0.10 |
Source: Zedcrest Dealing Desk
Treasury Bills
The T-bills market was relatively quiet in today’s session, with most of the action centered on the OMO auction by the CBN. The CBN offered 200bn of the 29-Mar and 250m of the 30-Aug bills at today’s OMO auction. It eventually sold a total of N38bn and N314bn of both bills respectively to all bidders, at 13.15% and 14.95%, notwithstanding that some bids were above the respective stop rates. The market reacted to this development by trading some of the March to August bills up to the OMO auction levels of around 13% – 15%. Average T-bill yields consequently rose by 55bps to 14.02%. We expect another quiet trading session tomorrow, as market players remain uncertain of the continuity of the current OMO intervention by the CBN.
| Table 2: Benchmark Treasury Bills Rates | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 4-Jan-18 | 12.50 | 12.25 | 2.00 |
| 1-Feb-18 | 12.90 | 12.65 | 0.90 |
| 1-Mar-18 | 13.60 | 13.35 | 2.60 |
| 5-Apr-18 | 14.30 | 14.05 | 1.05 |
| 3-May-18 | 14.60 | 14.35 | 1.10 |
| 14-Jun-18 | 14.70 | 14.45 | 1.45 |
| 5-Jul-18 | 14.90 | 14.65 | 0.90 |
| 2-Aug-18 | 15.00 | 14.75 | 1.50 |
| 20-Sep-18 | 14.50 | 14.25 | 2.00 |
| 4-Oct-18 | 14.00 | 13.75 | 1.50 |
| 1-Nov-18 | 14.00 | 13.75 | 1.55 |
Source: Zedcrest Dealing Desk
Money Market
The OBB and OVN rates rose to 12.33% and 13.25% from 4% closing levels last week. This was due to the significant liquidity mop up by the CBN today Via an OMO T-bill Sale (N353bn) and FX SMIS ($210m Est.). System Liquidity is consequently estimated to close today at c.N130bn long. We expect rates to remain at these levels tomorrow, barring a further sizeable OMO intervention by the CBN.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 12.33 | 3.75 |
| Overnight (O/N) | 13.25 | 4.33 |
Source: FMDQ, Zedcrest Research
FX Market
The CBN Official spot rate appreciated marginally by 0.02% to N306.20/$ from its previous day rate of N306.25/$. Rates at the Investors and exporters FX window remained stable to close at N360.94/$. Rates at the parallel market however depreciated by 50k to close at N363.50/$.
| Table 3: FX Rates | ||
| Current (N/$) | Previous (N/$) | |
| CBN Spot | 306.20 | 306.25 |
| CBN SMIS | 330.00 | 330.00 |
| I&E FX Window | 360.94 | 360.96 |
| Parallel Market | 363.50 | 363.00 |
Source: CBN, FMDQ, REXEL BDC
