Culled—Proshare
January 16, 2019/Zedcrest Capital
***Nigeria’s Inflation Quickens to 7-Month High Ahead of MPC Vote***
KEY INDICATORS
| Indicator | Value | Commentary |
| Inflation | 11.44% | As at January 16, 2019. A c.16bps increase from 11.28% recorded in November 2018 |
| MPR | 14.00% | MPC Meeting to be held on the 21st and 22nd of January 2019 |
| External Reserves | $43.10bn | As at January 15, 2019. A c.0.00% increase from $43.10bn on January 14, 2019 |
| Brent Crude | $60.81pb | As at January 16, 2019. A c.1.20% increase from $60.09pb on January 15, 2018 |
Bonds
The bond market traded on a quieter note in today’s session, but with yields compressing marginally as buying interests persisted especially on the 2037s.
In line with our expectations, yields remained supported at c.15% on the mid to long end of the curve, and we do not expect them to significantly breach these levels in the near term, despite expectations for continued client demand from coupon payment inflows.
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 14.98 | 14.57 | (0.16) |
| 14.50 15-Jul-21 | 15.42 | 15.12 | (0.08) |
| 16.39 27-Jan-22 | 15.05 | 14.74 | 0.02 |
| 14.20 14-Mar-24 | 15.13 | 14.78 | 0.06 |
| 12.50 22-Jan-26 | 15.48 | 15.19 | 0.02 |
| 16.29 17-Mar-27 | 15.11 | 15.00 | 0.03 |
| 13.98 23-Feb-28 | 15.47 | 15.16 | (0.02) |
| 12.15 18-Jul-34 | 15.38 | 15.11 | (0.02) |
| 12.40 18-Mar-36 | 15.38 | 15.06 | (0.01) |
| 16.2499 18-Apr-37 | 15.18 | 15.02 | (0.05) |
Source: Zedcrest Dealing Desk
Treasury Bills
Yields in the T-bills market compressed by c.15bps as offshore demand spurred buying interests despite the depressed system liquidity levels.
The NTB auction by the DMO was however met by a relatively weaker level of demand on the 364-day which recorded a total sale of c.N120bn of the N193b offered, with the stop rate rising by 50bps to 15.00% as market players marked their bids to the CBN OMO stop rate. The 91- and 182-day bills were however fully sold out, with stop rates marginally higher on the 91-day (+10bps), whilst they remained unchanged on the 182-day at 13.10%.
We expect offshore interests to gradually thin out, with the uptick in PMA rates providing guidance on market expectation for higher yields levels in the wake of the significantly compressed system liquidity levels, fostered by the persistent OMO and FX interventions by the CBN.
| NTB Auction Result | |||||
| Tenor | Rate (%) | Offer (₦’bn) | Sub (₦’bn) | Sale (₦’bn) | |
| 91-days | 11.00 | 5.85 | 17.55 | 5.85 | |
| 182-days | 13.10 | 26.60 | 35.67 | 26.60 | |
| 364-days | 15.00 | 193.00 | 200.39 | 119.59 | |
Source: CBN
| Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14-Feb-19 | 14.85 | 14.30 | (0.15) |
| 14-Mar-19 | 14.80 | 13.85 | (0.60) |
| 4-Apr-19 | 13.90 | 13.65 | (0.15) |
| 2-May-19 | 14.00 | 13.10 | (0.50) |
| 13-Jun-19 | 13.35 | 13.10 | (0.25) |
| 18-Jul-19 | 14.00 | 13.15 | 0.25 |
| 1-Aug-19 | 14.30 | 13.65 | (0.25) |
| 12-Sep-19 | 14.85 | 14.65 | (0.05) |
| 3-Oct-19 | 14.90 | 14.65 | (0.05) |
| 14-Nov-19 | 14.80 | 14.55 | (0.10) |
| 5-Dec-19 | 15.10 | 15.00 | 0.00 |
Source: Zedcrest Dealing Desk
Money Market
Rates in the money market moderated slightly, with the OBB and OVN rates closing the day at 18.17% and 19.75% respectively, as there were no significant funding pressures in the system.
Despite inflows expected from OMO and Net PMA repayments (c.N634bn), we expect rates to remain slightly pressured as the CBN is expected to mop up the maturities via OMO/stab issuances.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 18.17 | 21.67 |
| Overnight (O/N) | 19.75 | 24.17 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank, the CBN strengthened the Naira/USD rate by c.0.16% to N306.35/$ at the spot market, while the SMIS rate remained unchanged at N356.73/$. The NAFEX rate in the I&E window also appreciated further by c.0.15% to another low of N363.05/$ following continued FX supply from offshores into the market. The cash and transfer rates at the parallel market however remained pressured, rising by 0.06% and 0.14% to N361.20/$ and N366.00/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.35 | 306.85 |
| CBN SMIS | 356.73 | 356.73 |
| I&E FX Window | 363.05 | 363.61 |
| Cash Market | 361.20 | 361.00 |
| Transfer Market | 366.00 | 365.50 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
Investors remained bullish on the NGERIA Sovereigns with yields moderating further by c.8bps on average.
In the NGERIA Corps investors renewed interests for the DIAMBK 19s, UBANL 22s and FIDBAN 22s.
