Culled—Proshare
July 16, 2018/Zedcrest Capital
*** FX reserves dip, as CBN maintain weekly interventions to support the Naira ***
KEY INDICATORS
| Indicator | Value | Commentary |
| Inflation | 11.61% | NBS postpones release date for June 2018 CPI & Inflation report to July 23, 2018. Expectations range between 10.90% & 11.20%. |
| MPR | 14.00% | Left unchanged at 14.00% at the MPC meeting on April 4, 2018. Next MPC meeting scheduled for July 23 & 24, 2018 |
| External Reserves | $47.62bn | As at July 13, 2018. A 0.36% decrease from $47.79bn as at July 2, 2018. |
| Brent Crude | $72.13pb | As at July 16, 2018. A 4.37% decrease from $75.43pb reported on July 13, 2018 |
Bonds
The bonds market witnessed a quiet trading session, with yields compressing by c.02bps on the average across the curve. Uncertainty on the direction of yields in the interim saw caution trading by market participants, this despite inflows from coupon payments expected this week.
We expect the market to trade cautiously as market expects the release of the Q3 bond auction calendar by the Debt Management Office (DMO) sometime this week as well as continued weakness in emerging markets’ fixed income and currencies as U.S. treasury yields edged higher (after growth in retail sales figures) supporting the Federal Reserve’s pace of interest rate increases.
| FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 13.27 | 12.77 | 0.07 |
| 14.50 15-Jul-21 | 13.41 | 13.29 | (0.09) |
| 16.39 27-Jan-22 | 13.46 | 13.20 | 0.12 |
| 14.20 14-Mar-24 | 13.93 | 13.67 | 0.03 |
| 12.50 22-Jan-26 | 14.04 | 13.92 | (0.07) |
| 16.29 17-Mar-27 | 13.96 | 13.91 | (0.01) |
| 13.98 23-Feb-28 | 14.11 | 14.01 | (0.05) |
| 12.15 18-Jul-34 | 14.22 | 14.12 | (0.03) |
| 12.40 18-Mar-36 | 14.17 | 14.07 | (0.01) |
| 16.2499 18-Apr-37 | 14.15 | 14.08 | (0.01) |
Source: Zedcrest Dealing Desk
Treasury Bills
Buoyant system liquidity continued to support demand activities in the T-Bills, as yields compressed by c.07bps on the average across the curve. Market participants’ buying was witnessed at the short to medium end of the curve, where yields compressed by c.17bps on the average. We expect this trend to continue as system liquidity increases this week from expected inflows (bond coupon payments & OMO maturities) and investors look to reinvest these flows.
The DMO will conduct a Primary Market Auction (PMA) this week (Wednesday), with N5.85bn, N26.60bn and N145.96bn of the 91-, 182- and 364-day bills expected to be rolled over. We do not expect any significant change in the PMA stop rates from the previous auction which cleared at 10%, 10.30% and 11.50% respectively.
| Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 2-Aug-18 | 11.65 | 11.10 | (0.30) |
| 13-Sep-18 | 12.05 | 11.05 | 0.20 |
| 4-Oct-18 | 10.30 | 9.00 | (0.25) |
| 1-Nov-18 | 11.55 | 11.25 | (0.30) |
| 6-Dec-18 | 12.05 | 11.75 | (0.10) |
| 3-Jan-19 | 11.90 | 11.75 | (0.25) |
| 14-Feb-19 | 12.05 | 11.70 | 0.00 |
| 14-Mar-19 | 12.10 | 11.50 | 0.30 |
| 4-Apr-19 | 12.10 | 11.00 | 0.10 |
Source: Zedcrest Dealing Desk
Money Market
Interbank liquidity opened at N266bn, causing overnight (O/N) and Open Buy-Back (OBB) rates to close at 9.50% and 10.50% respectively as market participants provided Naira for the weekly CBN Wholesale SMIS auction.
Rates are expected to remain low for the rest of the week as system liquidity increases via inflows from coupon payments (N34.71bn) and OMO maturities (N430.18bn), thus we expect the Central Bank of Nigeria to manage this via an OMO auction later in the week.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 9.50 | 8.92 |
| Overnight (O/N) | 10.50 | 9.42 |
Source: FMDQ, Zedcrest Research
FX Market
The Naira remained relatively stable, with the Interbank rate closing flat at N305.80/$ for the third consecutive trading session. The NAFEX rate depreciated by 69k, closing at N361.85/$ (c.0.19% down from N361.16/$ previously).
Rates in the parallel market closed the week on a flat note as USD cash and transfer rates closed at N358.70/$ and N362.50/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 305.80 | 305.80 |
| CBN SMIS | 330.00 | 330.00 |
| I&E FX Window | 361.85 | 361.16 |
| Cash Market | 358.50 | 358.70 |
| Transfer Market | 362.50 | 362.50 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds:
Demand pressures for the NGERIA Sovereigns slowed down in the first trading session of the week, as yields compressed by an average of c.02bps across the traded tickers.
Yields on NGERIA Corps expanded by an average of c.16bps across the curve, losing the gains made in the previous week. Interests from market participants were witnessed at the short-end of the curve, mainly on the DIAMBK 19s & FBNNL 21s.