Culled—Proshare
February 22, 2019/Zedcrest Capital
***FG Generated N1.10tn from VAT in 2018*** – NBS
KEY INDICATORS
| Indicator | Value | Commentary |
| Inflation | 11.37% | As at February 15, 2019. A c.7bps decline from 11.44% recorded in December 2018 |
| MPR | 14.00% | Left Unchanged for the 15th Consecutive Time at the Jan. 22, 2019 MPC Meeting |
| External Reserves | $42.62bn | As at February 19, 2019. A c.0.16% decrease from $42.69bn on February 18, 2019 |
| Brent Crude | $66.83pb | As at February 21, 2019. A c.0.51% decrease from $67.17pb on February 20, 2019 |
Bonds
Despite the significant sale on the 10-yr bond at the previous day’s auction, market players remained well bid on the 2028s which compressed by c.10bps from its clearing rate of 14.93% at the auction. Yields were however marginally higher by c.5bps on the day, as offers improve markedly from their levels in the previous session.
We expect market players to remain well bid in tomorrow’s session, with c.N49bn Coupons on the 2028s (to be paid Monday) expected to sustain demand for the bond.
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14.50 15-Jul-21 | 14.99 | 14.58 | (0.08) |
| 16.39 27-Jan-22 | 14.86 | 14.77 | 0.23 |
| 14.20 14-Mar-24 | 14.65 | 14.48 | 0.06 |
| 12.50 22-Jan-26 | 14.78 | 14.53 | 0.01 |
| 16.29 17-Mar-27 | 14.79 | 14.58 | (0.01) |
| 13.98 23-Feb-28 | 14.83 | 14.59 | (0.01) |
| 12.15 18-Jul-34 | 14.60 | 14.35 | 0.00 |
| 12.40 18-Mar-36 | 14.57 | 14.20 | 0.02 |
| 16.2499 18-Apr-37 | 14.44 | 14.10 | (0.01) |
Source: Zedcrest Dealing Desk
Treasury Bills
The T-bills market traded with mixed sentiments in today’s session, with slight demand on some short and mid tenors offset by a slight uptick on the longer end of the curve, which was due to the renewed OMO offer by the CBN.
Market players bided aggressively for the 1-yr OMO bill offered, with total subscriptions of c.N725bn of the N400bn offered. The CBN consequently prorated its sale on the 1yr by c.86%, resulting in a total sale of c.N627bn, whilst subscriptions on other tenors (c.N61bn) were fully sold with rates maintained at previous levels.
We expect demand to be sustained on the long end of the curve due to the amount of unfilled bids at today’s auction. The short end should however trend slightly bearish on the back of the system liquidity squeeze from today’s OMO Sale.
| OMO Auction Result | ||||
| Tenor | Rate (%) | Offer (N’bn) | Sub (N’bn) | Sale (N’bn) |
| 98 day | 11.90 | 50.00 | 7.91 | 7.91 |
| 189 day | 13.50 | 100.00 | 53.06 | 53.06 |
| 364 day | 15.00 | 400.00 | 725.61 | 627.22 |
| Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14-Mar-19 | 10.00 | 8.50 | 0.05 |
| 4-Apr-19 | 12.00 | 11.20 | (1.00) |
| 2-May-19 | 12.00 | 11.00 | (0.15) |
| 13-Jun-19 | 11.95 | 10.75 | (0.05) |
| 18-Jul-19 | 12.65 | 12.40 | 0.05 |
| 1-Aug-19 | 13.00 | 12.35 | 0.10 |
| 12-Sep-19 | 14.10 | 14.00 | (0.10) |
| 3-Oct-19 | 14.70 | 14.55 | 0.00 |
| 14-Nov-19 | 14.90 | 14.70 | 0.00 |
| 5-Dec-19 | 14.95 | 14.80 | 0.00 |
| 2-Jan-20 | 14.95 | 14.80 | 0.00 |
Source: Zedcrest Dealing Desk
Money Market
Rates in the money market moderated slightly, as market players anticipated inflows from OMO T-bill maturities (c.N580bn). System liquidity however ended the session significantly lower at c.N140bn negative, as the CBN mopped up all system liquidity via a c.N688bn OMO Sale.
We consequently expect stop rates to trend higher tomorrow, in response to the significant squeeze in system liquidity.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 15.00 | 15.00 |
| Overnight (O/N) | 15.50 | 15.83 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank, the Naira/USD rate remained stable at N306.80/$(Spot) and N356.97/$(SMIS). The NAFEX rate in the I&E window appreciated further by c.0.15% to N361.48/$. At the parallel market, the cash rate appreciated marginally by 0.03% to N358.20/$, while the transfer rate depreciated further by 0.14% to N366.00/$.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.80 | 306.80 |
| CBN SMIS | 356.97 | 356.97 |
| I&E FX Window | 361.48 | 362.04 |
| Cash Market | 358.20 | 358.30 |
| Transfer Market | 366.00 | 365.50 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Sovereigns opened the session on a firmly bullish note, but moderated slightly towards the end of the session, with yields closing lower by c.5bps on the day, as oil prices retreated from its previous day’s high.
In the NGERIA Corps, we witnessed slight sell on the ACCESS 21s Snr.
