Culled—Proshare

January 17, 2018/Zedcrest Capital

***Inflation drops to 15.37% year on year in Dec 2017 from 15.90% in November***

Bonds

The Bond market remained scantily traded due to weak appetite from market players. We however witnessed some buys on the 2036 bond with total buys of N1.4bn taking its yield downward by c.11bps. Average bond yields consequently compressed by 5bps to 13.36%, supported by the positive Dec-17 inflation results. We expect the market to remain slightly bullish, as sentiments are currently positive. The risk to this outlook however remains the weak appetite for bonds by local investors unwilling to buy at sub-13.5% levels at the moment.

Treasury Bills

The T-bills market was slightly bearish, with some sell especially on the short end of the curve (Feb – May) maturities, as market players were looking to position themselves for the 1-yr bill at tomorrow’s PMA. The 19-Apr bill witnessed further decline, even as the CBN sold N2bn of the bill at its OMO auction at 12.60%. N27.5bn of the 28-Jun bill was also sold at 14.40%. The CBN would offer a total of N230bn bills at its PMA scheduled for tomorrow. We expect significant demand on the 364-day bill with a range of 13.70 – 13.90 expected stop rate.

Money Market

The OBB and OVN rate declined to 7.50% and 8.50%, as system liquidity improved on the backdrop of inflows from retail FX refunds to banks by the CBN. We expect rates to decline slightly tomorrow, as there are no significant outflows expected.

FX Market

The CBN Official spot rate appreciated by 0.02% to N362.50 from its previous day rate of N305.80/$. Rates at the Investors and exporters FX window also appreciated by 0.06% to N360.43/$. Rates at the parallel market however depreciated further by 0.08% to N362.50/$.