Culled—Proshare
2/5/2018/Zedcrest Capital
***FG targets September for new minimum wage takeoff***
Bonds
The Bond market opened on a relatively quiet note, as market players were more focused on the T-bills PMA by the CBN. Yields however trended lower later in the day, following release of the T-bills PMA results which showed significant oversubscription and huge amount of lost bids at the auction. We consequently saw some client flows into the bond market, with yields compressing by c.11bps on average. We expect slight reversals in yields in anticipation of an OMO T-bill auction tomorrow.
Treasury Bills
The T-bills Market remained slightly bullish, following the significant oversubscription at today’s PMA, in which a total of N95bn were sold at a 4.2X average bid to cover ratio. The auction stop rates trended significantly lower by c.100bps from previous levels, consequently resulting in huge amounts of lost bids at the auction. We expect the market to remain bullish tomorrow, even as we expect an OMO auction by the CBN to mop up c.N187bn in maturing OMO bills.
Money Market
The OBB and OVN rates remained stable at 1.92% and 2.21% respectively, as system liquidity remained relatively unchanged at c.N400bn positive. We expect rates to remain stable at these levels as we do not expect any significant liquidity pressures in the market.
FX Market
The Interbank rate remained stable at its previous rate of N305.70/$, with the CBN’s external reserves recorded to have improved by 1.54% to $47.36bn. The NAFEX rate depreciated further by 0.04% to N360.67/$, while rates in the Unofficial market remained stable at N361.50/$.
Eurobonds
The NGERIA Sovereigns have been severely beaten since the start of the week, with most of the longer tenured bonds now trading at a discount to their par values, having lost as much as 300pt in today’s session alone. This came on the backdrop of fears of a further hike in the US FED Funds rate, as the FED’s preferred inflation measure (PCE) came out slightly above the target rate of 2%. Yields have consequently risen by as much as 25bps with all of the recent issuances (27s, 30s, 38s & 47s) now trading at their all-time highs.
The NGERIA Corps were also bearish, but on a more moderate tone. Investors were mostly bearish on the Zenith and UBANL 22s, which lost –0.25pt on average. We witnessed trades on the SEPLLN 23s within the 101.25 – 101.75 range, as some market players took profit on their holdings. It now trades wider and slightly lower at 101/102.
We witnessed a new 10– and 30-yr Angolan Eurobond issuance with IPGs advised around 8.40% and 9.40% respectively.
