Culled—-Proshare
January 31, 2019/Zedcrest Capital
***FG targets $2bn from oil, gas lease licence renewal***
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% | Left Unchanged for the 13th Consecutive Time at the Jan. 22, 2019 MPC Meeting |
| External Reserves | $43.17bn | As at January 28, 2019. A c.0.01% decrease from $43.13bn on January 25, 2019 |
| Brent Crude | $61.69pb | As at January 30, 2019. A c.0.12% increase from $60.36pb on January 29, 2018 |
Bonds
The Bond market traded on a relatively flat note, with yields compressing marginally by c.1bp on the back of slight demand on the 22s and 36s.
In line with our expectations, the Bond auction by the DMO witnessed a moderate level of subscription, with demand skewed towards the 2028 bond and average bid-to-cover at 1.68X. The DMO consequently sold a total of c.N117bn of the N150bn offered, with stop rates clearing at c.15bps below their previous levels.
Given the robust demand at the auction today, we expect slight demand interests to persist in the near term. Our longer term outlook however remains slightly bearish as market players are expected to become slightly risk off bonds in view of the forthcoming elections.
| FGN Bond Auction Result | ||||
| Maturity | Rate (%) | Offer (N’bn) | Sub (N’bn) | Sale (N’bn) |
| APR 2023 | 15.20 | 50.00 | 16.57 | 5.85 |
| MAR 2025 | 15.25 | 50.00 | 31.25 | 20.10 |
| FEB 2028 | 15.35 | 50.00 | 149.27 | 91.04 |
Source: Zedcrest Research
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 15.20 | 14.46 | 0.01 |
| 14.50 15-Jul-21 | 15.37 | 15.17 | (0.02) |
| 16.39 27-Jan-22 | 14.91 | 14.52 | (0.15) |
| 14.20 14-Mar-24 | 15.01 | 14.61 | 0.05 |
| 12.50 22-Jan-26 | 15.31 | 14.95 | 0.05 |
| 16.29 17-Mar-27 | 15.18 | 15.01 | 0.02 |
| 13.98 23-Feb-28 | 15.40 | 15.29 | 0.04 |
| 12.15 18-Jul-34 | 15.31 | 15.05 | 0.01 |
| 12.40 18-Mar-36 | 15.13 | 15.08 | (0.09) |
| 16.2499 18-Apr-37 | 15.13 | 14.99 | (0.03) |
Source: Zedcrest Dealing Desk
Treasury Bills
The T-bills market was scantily traded as demand interests were focused at the NTB auction by the CBN. Yields however compressed further by c.10bps on the back of improved system liquidity levels which fostered some buying interests on the short-end of the curve.
The NTB auction was moderately subscribed with average bid-to-cover of 1.28x. The CBN was consequently able to raise the total amount of c.N255bn T-bills offered, with rates clearing at their previous levels of 11.00%, 13.50% and 15.00% on the 91-, 128- and 364-day bills respectively.
We expect the market to trade on a relatively flat note tomorrow, as the CBN is expected to float a sizeable auction on the back of the robust system liquidity levels (c.N300bn) and expected inflows from OMO maturities (c.N191bn).
| NTB Auction Results | ||||
| Tenor | Rate (%) | Offer (₦’bn) | Sub (₦’bn) | Sale (₦’bn) |
| 91-days | 11.00 | 7.85 | 41.05 | 28.02 |
| 182-days | 13.10 | 69.57 | 68.42 | 58.68 |
| 364-days | 15.00 | 177.22 | 214.38 | 167.93 |
Source: Zedcrest Research
| Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14-Feb-19 | 13.00 | 12.00 | (0.45) |
| 14-Mar-19 | 12.80 | 12.25 | (0.70) |
| 4-Apr-19 | 12.75 | 12.00 | (0.75) |
| 2-May-19 | 11.75 | 11.65 | (0.15) |
| 13-Jun-19 | 12.80 | 12.25 | (0.20) |
| 18-Jul-19 | 13.50 | 12.50 | 0.00 |
| 1-Aug-19 | 13.50 | 13.35 | (0.20) |
| 12-Sep-19 | 14.55 | 14.20 | 0.05 |
| 3-Oct-19 | 14.85 | 14.60 | 0.00 |
| 14-Nov-19 | 14.95 | 14.80 | (0.05) |
| 5-Dec-19 | 14.95 | 14.85 | (0.05) |
Source: Zedcrest Dealing Desk
Money Market
Rates in the money market declined further by c.7pct as system liquidity was significantly bolstered by inflows from FAAC payments in the previous session. The OBB and OVN rates consequently ended the session at 3.83% and 4.50% respectively.
We expect funding rates to inch higher tomorrow, as the CBN is expected to conduct a sizeable OMO auction to mop up the excess system liquidity and expected OMO inflows.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 3.83 | 10.17 |
| Overnight (O/N) | 4.50 | 10.83 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank, the Naira/USD rate remained unchanged at N306.75/$ (spot) and N357.97/$ (SMIS). The NAFEX rate in the I&E window appreciated marginally by c.0.01% to N363.32/$. At the parallel market, cash rates appreciated by 0.42% to N358.70/$, whereas transfer rates depreciated by c.0.14% to N366.00/$.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.75 | 306.75 |
| CBN SMIS | 357.97 | 357.97 |
| I&E FX Window | 363.32 | 363.34 |
| Cash Market | 358.70 | 360.20 |
| Transfer Market | 366.00 | 365.50 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Sovereigns remained relatively weak, with yields ticking higher by c.3bps on the day.
In the NGERIA Corps, market players were relatively quiet except for some slight sell-off witnessed on the Access 21s Snr.
