Culled—Proshare

May 28, 2018/Zedcrest Capital

***CBN Mandates BDCs to Access Forex Window Thrice Weekly***

Bonds

The Bond Market opened the week on a relatively quiet note with very little trades executed in the market. Yields rose higher by c.7bps on average due to slight sell on the shorter end of the curve. We witnessed fewer volumes of demand around the 10-yr tenor (2027s/2028s) with yields trending just slightly lower from their previous levels. We expect a relatively quiet session upon resumption from the Democracy Day break as market players would be looking to wind up for the month.

Treasury Bills

The T-bills market traded on a significantly bullish note, with most demand witnessed on the short end of the curve which compressed by as much as 50bps due to the significant improvement in system liquidity, following inflows from FAAC payments into the system. The Medium to long end of the curve however traded on a relatively flat note, with just marginal declines on the medium tenured bills, as market players anticipate a continued OMO intervention by the CBN to moderate the level of liquidity in the system. We expect yields to however remain slightly moderated due to relatively buoyant level of liquidity in the system.

There will be an NTB Auction on the 30th of May 2018. Please see our expectations below:

Money Market

The OBB and OVN rates crashed significantly by c.15pct to 3.67% and 4.42% respectively, as system liquidity improved significantly to c.250bn positive following inflows from FAAC Payments into the system. We expect rates to remain moderated, even as we anticipate inflows from the N300bn FGN 30-May-2018 bond maturity including c.N16bn in final coupon payments. We however anticipate a likely OMO auction by the CBN to moderate the excess liquidity in the system.

FX Market

The Interbank rate depreciated by 0.02% to N305.95/$ from its previous rate of N305.90/$. This was despite the CBN’s wholesale intervention sales of c.$210m in the market. The NAFEX closing Rate remained stable at its previous rate of N361.57/$. Rates in the Cash and Transfer Market however appreciated by N2.00 and N1.00 to N363.00/$ and N367.00/$ respectively. This was following announcements of increased interventions by the CBN in the retail segment of the market.

Eurobonds:

The NGERIA Sovereigns traded on a relatively quiet note, following the National Bank holiday (US Memorial day break). Yields however compressed by c.2bps on average, with continued positive interests witnessed especially on the 2032s and 2047s which gained c.0.20pt on average.

The NGERIA Corps were also mostly quiet. Investors were however slightly bearish on most of the traded tickers, with marginal declines witnessed mostly on the FBNNL 21s and UBANL 22s. We however observed slight gains on the Zenith 19s and 22s.