Culled—Proshare
March 1, 2019/ Zedcrest Capital
***Rally on 10-Year FGN Bond Push Yields 20bps Lower***
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 | $42.31bn | As at February 23, 2019. A c.0.12% decrease from $42.33bn on February 22, 2019 |
| Brent Crude | $66.32pb | As at February 28, 2019. A c.0.73% decrease from $66.81pb on February 27, 2019 |
Bonds
The FGN Bond Market remained significantly bullish in today’s session with demand witnessed mostly from off-shores on the 2028 bond which compressed by c.43bps to trade as low as 13.90% during the session. We also witnessed sustained interests on the longer dated bonds which traded as low as 13.80% on the 36s and 37s. Yields were consequently lower by c.20bps on average.
Due to the significant cut in the 1yr OMO rate by the CBN today, and the sustained interests from offshore clients, we maintain a bullish stance on the market, whilst also advocating for cautious trading at these levels.
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14.50 15-Jul-21 | 14.47 | 13.51 | (0.37) |
| 16.39 27-Jan-22 | 14.59 | 13.81 | (0.13) |
| 12.75 27-Apr-23 | 14.01 | 13.51 | 0.00 |
| 14.20 14-Mar-24 | 14.28 | 13.66 | (0.12) |
| 13.53 23-Mar-25 | 14.28 | 13.77 | 0.00 |
| 12.50 22-Jan-26 | 14.24 | 13.63 | (0.24) |
| 16.29 17-Mar-27 | 14.21 | 13.84 | (0.13) |
| 13.98 23-Feb-28 | 13.97 | 13.91 | (0.43) |
| 12.15 18-Jul-34 | 14.07 | 13.78 | (0.33) |
| 12.40 18-Mar-36 | 14.03 | 13.84 | (0.37) |
| 16.2499 18-Apr-37 | 14.02 | 13.80 | (0.21) |
Source: Zedcrest Dealing Desk
Treasury Bills
The T-bills market remained firmly bullish following the signifcant level of demand at the previous day’s NTB auction. We consequently witnessed a continued rally on the longer tenor bills down to c.13.50%, whilst market players awaited the OMO auction by the CBN.
In tune with the significant demand levels, the OMO auction by the CBN was significantly oversubscribed with total demand of c.N1.37trn of the N350bn offered. Given the significant demand (N1.21trn) on the 364-day bill, the CBN cut the stop rate by 70bps to 14.30% whilst making a total sale of N927bn on the Tenor. Subscriptions on the 91- and 182 day offers, were however fully sold, with rates maintained at their previous levels of 11.90% and 13.50% respectively.
Given the amount of lost bids on the 364-day bill (c.N295bn), we expect demand on the long tenors to remain strong in tomorrow’s session. Rates on the shorter tenors may however trend slightly higher as liqudiity pressures mount.
| OMO Auction result | ||||
| Tenor | Rate (%) | Offer (N’bn) | Sub (N’bn) | Sale (N’bn) |
| 91 day | 11.90 | 50.00 | 55.51 | 55.51 |
| 182 day | 13.50 | 100.00 | 92.59 | 92.59 |
| 364 day | 14.30 | 250.00 | 1,217.10 | 927.75 |
| Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14-Mar-19 | 10.00 | 5.00 | (0.50) |
| 4-Apr-19 | 11.00 | 5.00 | (0.50) |
| 2-May-19 | 10.80 | 9.00 | 0.30 |
| 13-Jun-19 | 10.00 | 5.00 | 0.00 |
| 18-Jul-19 | 12.60 | 12.35 | 0.20 |
| 1-Aug-19 | 12.25 | 12.00 | (0.05) |
| 12-Sep-19 | 13.20 | 12.80 | (0.30) |
| 3-Oct-19 | 13.75 | 13.35 | (0.15) |
| 14-Nov-19 | 13.80 | 13.30 | (0.55) |
| 5-Dec-19 | 14.00 | 13.50 | (0.25) |
| 2-Jan-20 | 14.00 | 13.75 | (0.50) |
| 6-Feb-20 | 14.00 | 13.60 | (0.50) |
Source: Zedcrest Dealing Desk
Money Market
Rates in the money market rose higher by c.4pct following the significant OMO sale by the CBN which was slightly moderated by some retail FX refunds later in the day. The OBB and OVN rates consequently ended the session at 13.17% and 14.25% respectively.
We expect rates to trend higher tomorrow, with the Bi-weekly retail FX funding by banks expected to cancel out inflows from FAAC payments into the system.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 13.17 | 9.50 |
| Overnight (O/N) | 14.25 | 10.58 |
Source: FMDQ, Zedcrest Research
FX Market
At the Interbank, rates remained unchanged at N306.85/$ (Spot) and N356.97/$ (SMIS). The NAFEX rate in the I&E window appreciated further by 0.05% to N360.99/$. At the parallel market, the cash and transfer rates remained unchanged at N358.00/$ and N366.00/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.85 | 306.85 |
| CBN SMIS | 356.97 | 356.97 |
| I&E FX Window | 360.99 | 361.18 |
| Cash Market | 358.00 | 358.00 |
| Transfer Market | 366.00 | 366.00 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Sovereigns traded on a flat note in today’s session, with bids turning slightly weaker during the session.
In the NGERIA Corps, we witnessed significant demand for the FIDBAN 22s which compressed by c.15bps on the day. This is following positive comments by Moody’s on the relatively stronger FCY positions of the Nigerian Banks.
