Culled—Proshare
November 5, 2018/Zedcrest Capital
***Nigeria Braces for Nationwide Strike Over 66% Minimum-Wage Hike Demand***
KEY INDICATORS
| Indicator | Value | Commentary |
| Inflation | 11.28% | As at October 16, 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 | $41.91bn | As at November 2, 2018. A c.0.10% decrease from $41.95bn on November 1, 2018 |
| Brent Crude | $73.73pb | As at November 5, 2018. A c.1.28% decrease from $72.80pb on November 2, 2018 |
Bonds
Bond yields compressed by c.7bps in today’s session, as risk off sentiments moderated slightly on the longer end of the curve. We also witnessed some interests on the shorter end of the curve (20s & 21s), due to the signifcantly robust system liqudity levels.
Despite occasional pullbacks, the overall market trend is expected to remain bearish, due to expectations for a further uptrend in monthly inflation and for sustained higher yield levels in the T-bills market.
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 14.54 | 14.15 | 0.00 |
| 14.50 15-Jul-21 | 15.41 | 15.15 | (0.28) |
| 16.39 27-Jan-22 | 15.06 | 14.56 | 0.09 |
| 14.20 14-Mar-24 | 15.31 | 15.18 | (0.03) |
| 12.50 22-Jan-26 | 15.59 | 15.45 | (0.06) |
| 16.29 17-Mar-27 | 15.55 | 15.42 | (0.07) |
| 13.98 23-Feb-28 | 15.74 | 15.66 | (0.04) |
| 12.15 18-Jul-34 | 15.71 | 15.61 | (0.19) |
| 12.40 18-Mar-36 | 15.61 | 15.48 | (0.08) |
| 16.2499 18-Apr-37 | 15.42 | 15.34 | (0.08) |
Source: Zedcrest Dealing Desk
Treasury Bills
The Tbills market was dominated by interests on the shorter end of the curve, mostly on the Nov maturities, due to the significantly buoyant level of liquidity in the system. Market players were however slightly bearish on the longer end of the curve, due to expectations for continued OMO auctions at more attractive yield levels.
We expect the market to be relatively flat in the coming days, with some profit taking expected on the some of the shorter tenured bills which have been rallied to single digit levels.
| Benchmark FGN Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 6-Dec-18 | 11.50 | 11.10 | (0.60) |
| 3-Jan-19 | 12.75 | 12.40 | 0.00 |
| 14-Feb-19 | 12.60 | 12.50 | (0.15) |
| 14-Mar-19 | 12.65 | 12.10 | (0.15) |
| 4-Apr-19 | 12.75 | 12.25 | 0.00 |
| 18-Jul-19 | 13.00 | 12.70 | 0.00 |
| 1-Aug-19 | 13.95 | 13.40 | 0.00 |
| 12-Sep-19 | 14.35 | 14.25 | 0.00 |
| 3-Oct-19 | 14.40 | 14.25 | 0.05 |
Source: Zedcrest Dealing Desk
Money Market
In line with our expectations, the OBB and OVN rates moderated by c.1pct to 3.08% and 3.58%, as system liquidity remained significantly robust following inflows from the CBN in the previous session.
Barring a significant liquidity mop up by the CBN, system liquidity which opened the week at c.950bn is expected to remain significantly robust for the most part of the week. Funding rates are consequently expected to remain stable at single digit levels.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 3.08 | 4.08 |
| Overnight (O/N) | 3.58 | 4.83 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank, the Naira/USD spot rate depreciated by c.0.02% to N306.65/$ (spot), while the SMIS rate remained unchanged at N361.45/$. However, at the I&E FX window the NAFEX closing rate appreciated by c.0.03% to N363.64/$ from N364.74/$ previously.
At the parallel market segment, the cash rates remained unchanged at N361.00/$, while the transfer rates depreciated by 50k to N364.50/$.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.65 | 306.60 |
| CBN SMIS | 361.45 | 361.45 |
| I&E FX Window | 363.64 | 363.74 |
| Cash Market | 361.00 | 361.00 |
| Transfer Market | 364.50 | 364.00 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Sovereigns traded relatively flat on the day, with yields rising marginally higher by c.2bps, following slight sell mostly on the Jul 2023.
In the NGERIA Corps, clients showed slight interests on the DIAMBK 19s, while selloffs were seen on the FIDBAN 22s, which lost c.0.30pct (in price terms) on the day.
