Culled—Proshare
December 17, 2018/Zedcrest Capital
***CBN spends $11bn on forex this year***
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 | $60.65pb | As at December 17, 2018. A c.0.03% decrease from $60.67pb on December 14, 2018 |
Bonds
The FGN Bond market opened the week on a relatively flat note, with only slight interests seen on the 2028 and 2037 bonds, while yields remained unchanged on the day.
We expect yields to tick slightly higher mostly on the short and mid tenors in the build up to the FGN bond auction scheduled to hold on Wednesday.
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 15.28 | 14.90 | 0.00 |
| 14.50 15-Jul-21 | 15.78 | 15.48 | 0.03 |
| 16.39 27-Jan-22 | 15.12 | 14.88 | 0.02 |
| 14.20 14-Mar-24 | 15.26 | 15.10 | 0.00 |
| 12.50 22-Jan-26 | 15.82 | 15.58 | 0.03 |
| 16.29 17-Mar-27 | 15.70 | 15.61 | (0.01) |
| 13.98 23-Feb-28 | 15.84 | 15.70 | (0.02) |
| 12.15 18-Jul-34 | 15.72 | 15.60 | (0.02) |
| 12.40 18-Mar-36 | 15.68 | 15.55 | 0.01 |
| 16.2499 18-Apr-37 | 15.59 | 15.43 | (0.03) |
Source: Zedcrest Dealing Desk
Treasury Bills
The T-bills market opened the week on a relatively flat note, with yields relatively unchanged on the day. This was as the CBN maintained its OMO intervention in the market, with a total sale of c.N20bn of the N150bn offered and with rates maintained across tenors. We however observed slight buying interests on some short and mid tenors as some market players took positions in anticipation of some client demand from the forthcoming PMA maturities (c.N25bn) to be fully repaid by the DMO.
We expect yields to remain elevated as the CBN is expected to maintain its spate of OMO interventions, which would put further pressure on system liquidity.
| Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 3-Jan-19 | 15.00 | 14.50 | (0.50) |
| 14-Feb-19 | 14.50 | 13.50 | (0.50) |
| 14-Mar-19 | 14.00 | 13.00 | (0.20) |
| 4-Apr-19 | 14.00 | 12.85 | (0.35) |
| 2-May-19 | 13.30 | 13.00 | 0.00 |
| 13-Jun-19 | 13.65 | 13.30 | 0.10 |
| 18-Jul-19 | 14.00 | 12.75 | 0.00 |
| 1-Aug-19 | 14.90 | 14.25 | (0.10) |
| 12-Sep-19 | 15.10 | 14.90 | (0.05) |
| 3-Oct-19 | 15.10 | 14.80 | (0.05) |
| 14-Nov-19 | 14.95 | 14.80 | (0.10) |
| 5-Dec-19 | 15.05 | 14.90 | (0.05) |
Source: Zedcrest Dealing Desk
Money Market
Rates in the money market opened the week higher, with the OBB and OVN rates closing the day at 36.67% and 38.58% respectively. This was as the CBN maintained its OMO and wholesale FX interventions in the Interbank. System liquidity is consequently estimated at c.N80bn negative from a positive level of c.N21bn opening the day.
We expect rates to remain elevated, with the CBN expected to maintain its pace of OMO issuance ahead of the c.N472bn in OMO maturities on Thursday.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 36.67 | 24.57 |
| Overnight (O/N) | 38.58 | 27.21 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank, the Naira/USD spot rate depreciated by c.0.02% to at N306.95/$, while the SMIS rate remained unchanged at N359.24/$ (SMIS). At the I&E FX window, the NAFEX closing rate appreciated marginally by c.0.01% to close at N365.18/$ from N365.23/$ previously.
At the parallel market, the cash and transfer rate depreciated by 0.55% and 0.27% to N365.00/$ and N367.00/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.95 | 306.90 |
| CBN SMIS | 359.24 | 359.24 |
| I&E FX Window | 365.18 | 365.23 |
| Cash Market | 365.00 | 363.00 |
| Transfer Market | 367.00 | 366.00 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Sovereigns opened the week on a slightly weaker note, with yields trending higher by c.6bps on average. We witnessed continued retracement from a recent uptrend mostly on the mid to long end of the curve, as investors price in expectations for a rate hike by the US FED at its 19th Dec FOMC meeting.
In the NGERIA Corps, today was the DIAMBK story with yields on the DIAMBK 19s gaining a whooping 800bps on the day, following announcement of a merger deal with ACCESS Bank Plc, which consequently doused fears of debt default on the bond maturing in five months. There were however slight sell on the ACCESS senior and subordinated 2021 bonds.
