Culled—Proshare
December 14, 2018/Zedcrest Capital
***Q3 2018 records overall BOP deficit *** – CBN
KEY INDICATORS
| Indicator | Value | Commentary |
| Inflation | 11.28% | As at December 14, 2018. A c.2bps increase from 11.26% recorded in October 2018 |
| MPR | 14.00% | Left Unchanged for the 12th Consecutive Time at the Nov. 22, 2018 MPC Meeting |
| External Reserves | $42.88bn | As at December 13, 2018. A c.0.12% increase from $42.83bn on December 12, 2018 |
| Brent Crude | $60.67pb | As at December 14, 2018. A c.1.61% increase from $59.71pb on December 13, 2018 |
Bonds
The FGN Bond market closed the week on a relatively quiet note, with slight interests on the 2028s and 2036s offset by some bearish retracement on the 2037s. Yields were consequently lower by c.1bp on the day.
We expect the market to trend slightly bearish next week, due to expectations for renewed supply of bonds from the forthcoming December FGN and Sukkuk Bond auctions.
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 15.28 | 14.95 | 0.00 |
| 14.50 15-Jul-21 | 15.75 | 15.50 | 0.00 |
| 16.39 27-Jan-22 | 15.10 | 14.88 | (0.02) |
| 14.20 14-Mar-24 | 15.26 | 15.10 | 0.00 |
| 12.50 22-Jan-26 | 15.79 | 15.65 | (0.03) |
| 16.29 17-Mar-27 | 15.71 | 15.61 | (0.04) |
| 13.98 23-Feb-28 | 15.86 | 15.75 | (0.05) |
| 12.15 18-Jul-34 | 15.74 | 15.61 | (0.01) |
| 12.40 18-Mar-36 | 15.67 | 15.51 | (0.03) |
| 16.2499 18-Apr-37 | 15.62 | 15.46 | 0.08 |
Source: Zedcrest Dealing Desk
Treasury Bills
Yields in the T-bills market remained elevated, as the CBN returned to the market with the same OMO tenors offered in the previous session. Market players sold off slightly on the short end of the curve, whilst there was slight demand around the mid tenors due to the more attractive rates in the secondary market.
In line with our expectation, the CBN conducted a special OMO auction (c.N39bn) to mop up further maturities, as market players undersubscribed the initial OMO auction with total bids of c.N39bn only of the N130bn offered. Rates were however maintained across tenors.
We expect the CBN to maintain its pace of OMO interventions in lieu of the c.N498bn in OMO and PMA maturities next week.
| Benchmark FGN Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 3-Jan-19 | 15.50 | 14.50 | 0.30 |
| 14-Feb-19 | 15.00 | 14.50 | 0.00 |
| 14-Mar-19 | 14.20 | 13.60 | (0.10) |
| 4-Apr-19 | 14.35 | 12.85 | 0.00 |
| 2-May-19 | 13.75 | 13.25 | 0.00 |
| 18-Jul-19 | 13.55 | 13.25 | 0.00 |
| 1-Aug-19 | 14.00 | 12.75 | 0.00 |
| 12-Sep-19 | 15.00 | 14.25 | 0.05 |
| 3-Oct-19 | 15.15 | 14.90 | 0.05 |
| 14-Nov-19 | 15.15 | 14.80 | 0.05 |
Source: Zedcrest Dealing Desk
Money Market
Rates in the money market trended higher by c.10pct, with the OBB and OVN rates closing the week at 24.57% and 27.21%, due to the c.N78bn OMO sale by the CBN which is estimated to have compressed system liquidity to c.N13bn positive as at COB today.
Rates are expected to trend higher in the coming week, as the CBN is expected to maintain its pace of OMO and FX (wholesale & retail) interventions in the market.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 24.57 | 16.50 |
| Overnight (O/N) | 27.21 | 17.25 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank, the Naira/USD rate remained stable at N306.90/$ (spot) and N359.24/$ (SMIS). At the I&E FX window, the NAFEX closing rate depreciated further by c.0.06% to close at N365.23/$ from N365.00/$ previously.
At the parallel market, the cash and transfer rate depreciated by 0.08% and 0.14% to N363.00/$ and N366.00/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.90 | 306.90 |
| CBN SMIS | 359.24 | 359.24 |
| I&E FX Window | 365.23 | 365.00 |
| Cash Market | 363.00 | 362.70 |
| Transfer Market | 366.00 | 365.50 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Sovereigns closed the week on a relatively quiet note having posted significant gains in the previous two sessions. Slight selloffs on the longer end of the curve (47s & 49s) were offset by some buying interests on the shorter end (22s), with yields closing flat on the day.
In the NGERIA Corps, yields returned bearish on the DIAMBK 19s and ACCESS 21s Sub, whilst we witnessed renewed buying interests on the ACCESS 21s Snr, Zenith 22s, UBANL 22s and FIDBAN 22s.
