Culled—Proshare
18/10/2018/NSE
***Oil Traders Consider Nigerian Proposal to Prolong Fuels Swap***
KEY INDICATORS
| Indicator | Value | Commentary |
| Inflation | 11.28% | As at October16, 2018,5bps up from 11.23% recorded in August 2018. |
| MPR | 14.00% | Left Unchanged for the 11th Consecutive Time at the Sept. 25, 2018 MPC Meeting |
| External Reserves | $42.84bn | As atOctober17, 2018. A c.0.16% decrease from $42.91bnon October16, 2018 |
| Brent Crude | $79.76pb | As at October 18, 2018. A c.0.54% decreasefrom$80.19pbon October 17, 2018 |
Bonds
The bond market remained relatively flat, but spreads tightened as offers improved slightly across most maturities, due to expectations of a hike in OMO rates by the CBN. Yields ticked higher on the longer end of the curve, while they compressed slightly on the shorter end, save for the 24s which ticked higher for the second consecutive session. On the average, yields were down by c.1bp on the day.
We expect a continued bearish positioning by market players as yields become gradually more attractive on T-bills, whilst we look forward to the FGN bond auction, where the DMO expects to raise N115bn in 5, 7 and 10yr bonds.
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 14.11 | 13.60 | 0.04 |
| 14.50 15-Jul-21 | 14.93 | 14.70 | (0.11) |
| 16.39 27-Jan-22 | 14.66 | 14.20 | (0.12) |
| 14.20 14-Mar-24 | 15.16 | 14.99 | 0.06 |
| 12.50 22-Jan-26 | 14.93 | 14.87 | (0.06) |
| 16.29 17-Mar-27 | 15.10 | 15.07 | (0.03) |
| 13.98 23-Feb-28 | 15.29 | 15.25 | 0.01 |
| 12.15 18-Jul-34 | 15.30 | 15.24 | 0.03 |
| 12.40 18-Mar-36 | 15.29 | 15.11 | 0.01 |
| 16.2499 18-Apr-37 | 15.18 | 15.02 | 0.03 |
Source: Zedcrest Dealing Desk
Treasury Bills
The T-bills market traded on a signifcantly bearish note, with yields trending higher by c.20bps.Selloffs were mostly on the longer tenured bills (Sep – Oct), as news of a higher than expected OMO clearing rate filtered into the market early into the trading session.
The expectations for higher OMO rates were confirmed by the OMO auction result released later in the day, as the CBN sold a total of c.275bn at +25bps higher on the 105 and 182 day bills and +50bps higher on the 329 day bill. With the effective yield on the long tenor OMO now at c.16%, yields on the long end of the curve have now hit levels last seen at the start of the year.
We expect the market to close the week on a relatively flat note. Market players should however cherry pick on some attractive bills on the shorter end of the curve.
| OMO Auction Result | ||||
| Tenor | Rate (%) | Offer (N’bn) | Sub (N’bn) | Sale (N’bn) |
| 105 day | 11.25 | 50.00 | 0.12 | 0.12 |
| 182 day | 12.75 | 100.00 | 45.70 | 45.70 |
| 329 day | 14.00 | 200.00 | 229.52 | 229.52 |
| Benchmark FGN Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 1-Nov-18 | 13.65 | 13.30 | (0.40) |
| 6-Dec-18 | 13.10 | 12.90 | 0.20 |
| 3-Jan-19 | 13.50 | 12.85 | 0.95 |
| 14-Feb-19 | 13.10 | 12.70 | 0.30 |
| 14-Mar-19 | 13.00 | 12.85 | 0.20 |
| 4-Apr-19 | 12.75 | 12.40 | 0.20 |
| 18-Jul-19 | 13.50 | 12.70 | 0.50 |
| 1-Aug-19 | 13.50 | 13.00 | 0.20 |
| 12-Sep-19 | 13.90 | 13.50 | 0.40 |
| 3-Oct-19 | 13.65 | 13.50 | 0.15 |
Source: Zedcrest Dealing Desk
Money Market
In line with our expectations, the OBB and OVN rates, dipped below the 20% mark, closing today at 13.33% and 14.58%, as system liquidity was slightly bolstered by the net OMO and bond coupon payments (+104bn) today. System liquidity is consequently estimated at c.N76bn positive from a negative position of c.N28bn opening the day.
We expect rates to close the week at these levels, as there are no significant outflows expected tomorrow.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 13.33 | 22.67 |
| Overnight (O/N) | 14.58 | 24.79 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank, the Naira/USD rate remained stable at N306.50/$ (spot) and N362.52/$ (SMIS). At the I&E FX window a total of $70.74mn was traded in 284 deals, with rates ranging between N358.00/$ – N365.30/$. The NAFEX closing rate depreciated by c.0.10% toN364.33/$ from N363.96/$ previously.
At the parallel market, the cash rate and transfer rates depreciated by 40k and 50k to N360.50/$ and N364.00/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.50 | 306.50 |
| CBN SMIS | 362.52 | 362.52 |
| I&E FX Window | 364.33 | 363.96 |
| Cash Market | 360.50 | 360.10 |
| Transfer Market | 364.00 | 363.50 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Sovereigns remained firmly bearish in today’s session, on the back of the approval of a New Eurobond issuance by the Nigerian senate yesterday. Yields were higher by c.10bps d/d, with the most selloffs still on the 20-yr (2038).
In the NGERIA Corps, the DIAMBK 19s gave up some gains, while interests remained strong onthe SEPLLN 23s.
