Culled—Proshare
September 25, 2018/Zedcrest Capital
***CBN Retains MPR at 14%, but with a Hawkish Bias***
KEY INDICATORS
| Indicator | Value | Commentary |
| Inflation | 11.23% | As at September14, 2018,9bps up from 11.14% recorded in July 2018. |
| MPR | 14.00% | Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting |
| External Reserves | $44.83bn | As atSeptember 21, 2018. A c.0.11% decrease from $44.89bnon Sept. 20, 2018 |
| Brent Crude | $81.38pb | As at September25, 2018. A c.0.13% increase from$80.16pbon Sept. 24, 2018 |
Bonds
The Bond market remained largely order driven, with yields closing relatively flat on the day. We witnessed slight sell on the 2027s which inched higher by c.5bps, as market players priced in expectations for the auction tomorrow.
Following the slightly hawkish tone by the CBN at its MPC meeting today, combined with fears of continued inflationary pressures from expected fiscal injections and rising food costs, our expectations are for yields to maintain a gradual uptick towards year end. We are consequently not bullish on bonds at these levels.
Local Demand for the short and mid tenured bonds has however been moderately robust in recent times and we consequently expect moderate demand at the FGN Bond auction tomorrow.
FGN Bond Auction Expectation
| Tenor | Offer (N’bn) | Expected Stop Rate (%) | Previous Stop Rate (%) |
| APR 2023 | 25.00 | 14.70 – 14.90 | 14.39 |
| MAR 2025 | 25.00 | 15.00 – 15.15 | 14.60 |
| FEB 2028 | 40.00 | 15.15 – 15.30 | 14.69 |
| Secondary Market Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 14.14 | 13.33 | 0.00 |
| 14.50 15-Jul-21 | 15.17 | 15.01 | 0.09 |
| 16.39 27-Jan-22 | 14.72 | 14.42 | (0.03) |
| 14.20 14-Mar-24 | 15.02 | 14.84 | 0.00 |
| 12.50 22-Jan-26 | 15.23 | 15.14 | 0.00 |
| 16.29 17-Mar-27 | 15.23 | 15.16 | 0.05 |
| 13.98 23-Feb-28 | 15.23 | 15.14 | 0.00 |
| 12.15 18-Jul-34 | 15.43 | 15.31 | (0.01) |
| 12.40 18-Mar-36 | 15.45 | 15.35 | 0.02 |
| 16.2499 18-Apr-37 | 15.42 | 15.28 | 0.01 |
Source: Zedcrest Dealing Desk
Treasury Bills
The T-bills market traded on a bearish note, with yields inching higher by c.35bps on average. This came on the back of some selloff mostly on the shorter end of the curve as market players reacted to the reversal of the Paris club credit by the CBN which led to a significant decline in system liquidity.
We expect yields to remain slightly elevated until Thursday, where we expect inflows from OMO T-bill maturities to bolster system liquidity and fuel some buying interests in the market.
Secondary Market Treasury Bills
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 4-Oct-18 | 12.00 | 9.00 | (1.50) |
| 1-Nov-18 | 13.00 | 11.50 | (1.00) |
| 6-Dec-18 | 13.00 | 12.10 | 0.00 |
| 3-Jan-19 | 12.75 | 12.05 | 0.60 |
| 14-Feb-19 | 13.00 | 12.55 | 0.20 |
| 14-Mar-19 | 12.85 | 12.30 | 0.00 |
| 4-Apr-19 | 13.00 | 12.00 | 0.55 |
| 18-Jul-19 | 13.00 | 12.50 | (0.20) |
| 1-Aug-19 | 13.00 | 12.50 | (0.35) |
Source: Zedcrest Dealing Desk
Money Market
The OBB and OVN rates spiked by c.10pct to 18.00% and 19.42% respectively. This came on the back of CBN debits in respect of reversal of Paris club payments to states by the FG. System Liquidity consequently declined sharply to c.N122bn from c.N478bn previously.
We expect rates to remain elevated at these levels, as there are no significant inflows expected tomorrow.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 18.00 | 8.33 |
| Overnight (O/N) | 19.42 | 9.08 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank, the Naira/USD rate remained stable at N306.35/$ (spot) and N360.94/$ (SMIS). At the I&E FX window a total of $264.04mn was traded in 390 deals, with rates ranging between N360.00/$ – N365.00/$. The NAFEX closing rate appreciated by c.0.15% to N363.72/$ from N364.28/$ previously.
At the parallel market, the cash rates appreciated by 20k to N359.60/$, while the transfer rate remained unchanged at N362.00/$.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.35 | 306.35 |
| CBN SMIS | 360.94 | 360.94 |
| I&E FX Window | 363.72 | 364.28 |
| Cash Market | 359.60 | 359.80 |
| Transfer Market | 362.00 | 362.00 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Sovereigns was slightly bullish, with yields compressing by c.4bps on average. We witnessed the most interest on the 2027 which gained c.0.33pct in price terms.
The NGERIA Corps were slightly bullish, with slight interests seen on the Zenith 19s, Access 21s Sub and Ecotra 21s.
