Culled—Proshare
September 3, 2018/Zedcrest Capital
***TUC appeals to governors to support new minimum wage***
KEY INDICATORS
| Indicator | Value | Commentary |
| Inflation | 11.14% | As at August 15, 2018, 9bps down from 11.23% recorded in June 2018. |
| MPR | 14.00% | Next MPC meeting scheduled for September 24 & 25, 2018 |
| External Reserves | $45.87bn | As at August 29, 2018. A c.0.07% decrease from $45.90bn on August 28 2018 |
| Brent Crude | $78.15pb | As at September 3, 2018. A c.0.59% increase, from $77.69pb on August 31, 2018 |
Bonds
Bearish sentiments persisted in the bond market in the first trading day of the new month, as initial selloffs from some offshores mostly on the 2027s and 2034s, widened spreads significantly at the start of the trading session. We witnessed some moderation in yields later in the day, following some bargain hunting by local clients on the mid tenor bonds. It however remained a relatively dull start to the month with yields rising by c.15bps across the curve.
We have witnessed yields forge new resistance at 15.50%, with most trades executed closer to offer prices at c.15.30% on the mid to long end of the curve. We expect these levels to be maintained in the near term, barring a hike in OMO auction rates by the CBN later this week.
| Secondary Market Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 14.52 | 14.10 | 0.15 |
| 14.50 15-Jul-21 | 14.92 | 14.50 | 0.27 |
| 16.39 27-Jan-22 | 14.81 | 14.10 | 0.17 |
| 14.20 14-Mar-24 | 15.15 | 14.78 | (0.05) |
| 12.50 22-Jan-26 | 15.38 | 15.27 | 0.13 |
| 16.29 17-Mar-27 | 15.32 | 15.29 | 0.14 |
| 13.98 23-Feb-28 | 15.40 | 15.19 | 0.23 |
| 12.15 18-Jul-34 | 15.44 | 15.35 | 0.12 |
| 12.40 18-Mar-36 | 15.50 | 15.20 | 0.17 |
| 16.2499 18-Apr-37 | 15.41 | 15.21 | 0.15 |
Source: Zedcrest Dealing Desk
Treasury Bills
Yields in the T-bills market compressed further by c.30bps in today’s session, as market players looked to the secondary market to invest maturities and excess liquidity positions. This came on the back of the absence of an OMO auction by the CBN in the previous week and inflows from FAAC payments into the system today. In line with our expectations, market players remained constrained to the shorter end of the curve, with very little trading activities observed beyond the Dec 2018 maturities.
The decision by the CBN to allow for surplus liquidity in the system, in a way, signals its intentions to keep short term rates stable. We consequently expect T-bill rates to remain relatively stable in the near term barring a change to the CBN’s liquidity management approach.
Secondary Market Treasury Bills
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 13-Sep-18 | 9.80 | 8.45 | (1.70) |
| 4-Oct-18 | 11.35 | 10.95 | (0.70) |
| 1-Nov-18 | 11.55 | 10.95 | 0.20 |
| 6-Dec-18 | 12.05 | 11.75 | (0.95) |
| 3-Jan-19 | 12.55 | 12.15 | (0.45) |
| 14-Feb-19 | 12.45 | 12.25 | (0.55) |
| 14-Mar-19 | 12.40 | 12.15 | (0.30) |
| 4-Apr-19 | 12.95 | 12.20 | (0.05) |
| 18-Jul-19 | 12.80 | 12.00 | 0.25 |
Source: Zedcrest Dealing Desk
Money Market
The OBB and OVN rates declined further to 4.42% and 5.42% respectively, as market players anticipated further inflows from FAAC payments to States and LGAs. System Liquidity which opened the day at c.N422bn is estimated to close today at c.N688bn, due to Inflows from FAAC which helped offset outflows for a wholesale SMIS Auction by the CBN.
We expect rates to remain relatively stable due to the significantly buoyant level of system liquidity.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 4.42 | 6.00 |
| Overnight (O/N) | 5.42 | 6.83 |
Source: FMDQ, Zedcrest Research
FX Market
The Naira/USD rate remained stable at the interbank, closing at N306.15/$. At the I&E FX window, a total of $146.49mn was traded in 282 deals, with rates ranging between N359.00/$ – N364.00/$. The NAFEX reference rate depreciated by 0.04% to N362.78/$ from N362.64/$ previously.
At the parallel market, the cash rates appreciated by 10k to N359.20/$, while transfer rates remained unchanged at N361.50/$.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.15 | 306.15 |
| CBN SMIS | 357.95 | 357.95 |
| I&E FX Window | 362.78 | 362.64 |
| Cash Market | 359.20 | 359.30 |
| Transfer Market | 361.50 | 361.50 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
With the US Markets on a Labor Day break, the NGERIA Sovereigns were scantily traded, with yields closing flat on the Day.
The NGERIA Corps were muted, except for slight interests seen on the GRTBNL 18s, and slight sell on the ZENITH and FIDBAN 22s.
