Culled—Proshare
December 1, 2018/Zedcrest Capital
KEY INDICATORS
| Indicator | Value | Commentary |
| Inflation | 11.26% | As at November 21, 2018. A c.2bps down from 11.28% recorded in September 2018 |
| MPR | 14.00% | Left Unchanged for the 12th Consecutive Time at the Nov. 22, 2018 MPC Meeting |
| External Reserves | $42.08bn | As at November 29, 2018. A c.0.20% increase from $41.99bn on November 28, 2018 |
| Brent Crude | $59.54pb | As at November 30, 2018. A c.0.25% decrease from $59.69pb on November 29, 2018 |
Bonds
The Bond market remained firmly bearish amidst further increase in rates at today’s OMO auction and more risk-off sentiments from offshore investors. Yields rose to YTD record highs closing at 15.63% on the average, c.19bps higher than the previous day’s close.
Going into the new month, we expect the bearish trend in the market to carry on as there is still room for further uptick in yields as we approach year end. We expect yields to test the 16.00% resistance level as risk-off sentiments persist till the early primary market auction.
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 15.43 | 14.54 | 0.43 |
| 14.50 15-Jul-21 | 15.58 | 15.31 | 0.15 |
| 16.39 27-Jan-22 | 14.93 | 14.34 | 0.20 |
| 14.20 14-Mar-24 | 15.31 | 14.98 | 0.23 |
| 12.50 22-Jan-26 | 15.82 | 15.62 | 0.12 |
| 16.29 17-Mar-27 | 15.80 | 15.71 | 0.04 |
| 13.98 23-Feb-28 | 15.98 | 15.87 | 0.08 |
| 12.15 18-Jul-34 | 15.87 | 15.50 | 0.26 |
| 12.40 18-Mar-36 | 15.77 | 15.65 | 0.14 |
| 16.2499 18-Apr-37 | 15.77 | 15.58 | 0.22 |
Source: Zedcrest Dealing Desk
Treasury Bills
The bearish trend in the T-bills market persisted today, as the CBN further drained system liquidity with a third OMO auction this week. Further increases of stop rates by the CBN led to a rise in yields across the NTB curve, as yields expanded by c.42bps on the average across the benchmark securities.
At the OMO auction, the CBN however sold a total of N119.20bn across three maturities on offer. The Apex bank again raised stop rates on the 98-, 182- and 364-day bills; clearing at 11.75% (+10bps), 13.50% (+30bps) and 15.00% (+20bps) respectively.
Maturing NTBills in the month of December 2018 (N78.05bn) as well as part of January 2019 maturities (N84.45bn) will be redeemed by the DMO next month, a notice from the CBN stated. There will therefore be no NTB PMA auctions on 13th and 20th December 2018.
We expect market to trade cautiously going into December as the CBN continues its aggressive mop-up strategy. With no other primary market supply, the OMO stop rates will largely dictate the direction of yields in the coming month.
| OMO Auction Result | ||||
| Tenor | Rate (%) | Offer (₦’bn) | Sub (₦’bn) | Sale (₦’bn) |
| 97-days | 11.75 | 20.00 | 0.006 | 0.006 |
| 181-days | 13.50 | 30.00 | 6.34 | 6.34 |
| 342-days | 15.00 | 50.00 | 113.48 | 113.48 |
| Benchmark FGN Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 3-Jan-19 | 14.00 | 12.75 | 0.60 |
| 14-Feb-19 | 14.00 | 13.26 | 0.50 |
| 14-Mar-19 | 13.30 | 12.75 | 0.20 |
| 4-Apr-19 | 14.00 | 12.85 | 1.00 |
| 2-May-19 | 14.00 | 12.75 | 0.00 |
| 18-Jul-19 | 14.00 | 12.75 | 1.00 |
| 1-Aug-19 | 14.00 | 13.50 | 0.05 |
| 12-Sep-19 | 14.95 | 14.50 | 0.30 |
| 3-Oct-19 | 14.95 | 14.55 | 0.25 |
| 14-Nov-19 | 14.95 | 14.60 | 0.25 |
Source: Zedcrest Dealing Desk
Money Market
With the sale of OMO securities (c.N119.92bn) by the CBN for the third time this week, Money Market rates ticked higher as system liquidity tightened. Open Buy-Back (OBB) and Overnight (O/N) rates closed at 16.57% (from 13.83%) and 17.36% (from 14.83%) respectively as market participant expected late credits from FAAC payments. System liquidity is consequently estimated at c.N32bn as at close of business today.
We expect funding rates to drop significantly opening next week, as inflows from October FAAC payments and OMO maturities of c.N684.84bn hit the system. The CBN is expected to aggressively mop up excess liquidity, and we expect several OMO auctions during the coming week.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 16.57 | 13.83 |
| Overnight (O/N) | 17.36 | 14.83 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank market, the Naira/USD rate remained unchanged to close at N306.80/$ (spot) and N359.81/$ (SMIS). At the I&E FX window a total of $384.26m was traded in 359 deals, with rates ranging between N358.50/$ – N365.00/$. The NAFEX closing rate depreciated by c.0.01% to close at N364.10/$ from N364.08/$ previously.
Further depreciation of the Naira halted today at the parallel markets, as the cash rate remained stable at N370/$ while the transfer rate also closed at N373/$.
The Central Bank introduced a special intervention FX sale to BDCs to accommodate seasonal increase in demand for Personal/BTA Travel Allowance. In addition to regular sales, the Apex bank will sell $15,000.00/BDC on Thursdays, commencing 6th December, 2018. We expect this supply to calm the volatility at the parallel markets in the new month.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.80 | 306.80 |
| CBN SMIS | 359.81 | 359.81 |
| I&E FX Window | 364.10 | 364.08 |
| Cash Market | 370.00 | 370.00 |
| Transfer Market | 373.00 | 372.50 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
It was a quiet trading session for NGERIA Sovereign Eurobonds, amidst little to no flows witnessed. Yields recorded no change across the curve from the previous day’s close.
Similarly, the NGERIA Corps also traded relatively quiet across most tracked tickers. We,however witnessed demand for the FBNNL and Zenith papers. The Zenith 19s saw the most demand interest, as yields dropped by c.33bps on the day.
