Culled—Proshare
January 22, 2018/Zedcrest Capital
KEY INDICATORS
| Inflation | 15.37% | Declined by 0.54% in December from 15.90% in November 2017 |
| MPR | 14.00% | Left unchanged at 14.00% at the MPC meeting of November 2017 |
| External Reserves | $39.92billion | Accreted 1.78% as at 18th January from $39.86 as at 17th January 2017 |
| Brent Crude | $68.59pb | Fell by 0.52% from $68.95pb on 19th January 2018 |
Bonds
The bond market maintained a bearish trend, with yields rising by c.10bps, on the backdrop of some profit taking by offshore clients on the 2037 bond which was sold up to 13.39% before retracing slightly back to 13.34%. We witnessed some buying interests however on the 2021 bond, while other bonds traded on a relatively quiet note. Yields are currently trading trending close to 13.40%, C.5bps away from our upper bid range. We consequently expect that most trades will be done at these levels (13.30% – 13.40%) and we do not see yields going significantly above our 13.45% mark.
| Table 1: Benchmark FGN Bond Yields | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 16.00 29-Jun-19 | 13.79 | 13.72 | 0.15 |
| 15.54 13-Feb-20 | 13.63 | 13.56 | 0.14 |
| 14.50 15-Jul-21 | 13.37 | 13.30 | 0.09 |
| 16.39 27-Jan-22 | 13.40 | 13.33 | 0.11 |
| 14.20 14-Mar-24 | 13.50 | 13.43 | 0.14 |
| 12.50 22-Jan-26 | 13.43 | 13.36 | 0.12 |
| 16.29 17-Mar-27 | 13.49 | 13.42 | 0.09 |
| 12.15 18-Jul-34 | 13.35 | 13.28 | 0.04 |
| 12.40 18-Mar-36 | 13.46 | 13.39 | 0.06 |
| 16.25 18-Apr-37 | 13.39 | 13.32 | 0.10 |
Source: Zedcrest Dealing Desk
Treasury Bills
The T-bills market was slightly bearish, following the OMO auction by the CBN on the 26-Apr and 2-Aug bills. Yields consequently rose by c.17bps with slight sell especially on the Feb, Apr, Aug and Oct tenors. We expect the market to remain slightly bearish due to the continued OMO issuance by the CBN and tight system liquidity.
Table 2: Benchmark Treasury Bills Rates | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 1-Feb-18 | 15.00 | 14.85 | 0.60 |
| 1-Mar-18 | 13.90 | 13.75 | 0.00 |
| 5-Apr-18 | 14.65 | 14.50 | 0.40 |
| 3-May-18 | 14.35 | 14.20 | 0.05 |
| 14-Jun-18 | 14.35 | 14.20 | 0.15 |
| 5-Jul-18 | 13.90 | 13.75 | 0.00 |
| 2-Aug-18 | 14.40 | 14.25 | 0.30 |
| 20-Sep-18 | 14.40 | 14.25 | 0.00 |
| 4-Oct-18 | 14.35 | 14.20 | 0.35 |
| 1-Nov-18 | 13.55 | 13.40 | 0.00 |
| 3-Jan-19 | 13.50 | 13.35 | 0.00 |
Source: Zedcrest Dealing Desk
| OMO Auction Result | ||||
| Tenor | Rate (%) | Offer (NBn) | Sub (N’bn) | Sale (N’bn) |
| 94 day | 12.60 | 30.00 | 0.19 | 0.19 |
| 192 day | 14.40 | 50.00 | 75.27 | 75.27 |
Source: CBN
Money Market
The OBB and OVN rates declined slightly by 150bps to 15.17% and 16.17%, even as system liquidity is estimated to be in Repo, following the OMO and wholesale FX sales by the CBN. We expect rates to decline slightly tomorrow, as banks would be able to access the CBN window to fund for their shortfalls.
| Table 3: Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 15.17 | 16.67 |
| Overnight (O/N) | 16.17 | 17.67 |
Source: FMDQ, Zedcrest Research
FX Market
The CBN Official spot rate appreciated by 0.02% to N305.65/$ from its previous day rate of N305.70/$. Rates at the Investors and exporters FX window depreciated by 0.16% to N360.67/$. Rates at the parallel market also depreciated by 0.06% to N363.00/$.
| Table 4: FX Rates | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 305.65 | 305.70 |
| CBN SMIS | 330.00 | 330.00 |
| I&E FX Window | 360.67 | 360.10 |
| Parallel Market | 363.00 | 362.80 |
Source: CBN, FMDQ, REXEL BDC