Culled—Proshare
July 27, 2019/Zedcrest Capital
Yields trended higher in the NGERIA Sovereign space as some expectations for a more than a quarter point rate cut by the US FED faded, following the fairly positive US Q2 19 GDP results (2.1% actual vs 1.8% consensus). Yields were consequently higher by c.7bps on the day, with the 47s and 49s the hardest hit.
Below are highlights of trading activities in the fixed income and forex market today
Bonds
The FGN Bond market traded on a relatively calm note, with yields marginally lower by c.2bps following continued interests on the Short end of the curve. We however witnessed slightly improved offers on the mid to long end of the curve.
We expect yields to remain relatively stable in the near term, due to the depressed yields levels in the T-bills market.
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14.50 15-Jul-21 | 12.74 | 12.71 | (0.56) |
| 16.39 27-Jan-22 | 12.92 | 12.32 | (0.09) |
| 12.75 27-Apr-23 | 13.43 | 12.91 | 0.34 |
| 14.20 14-Mar-24 | 13.56 | 12.60 | (0.03) |
| 13.53 23-Mar-25 | 13.57 | 12.76 | 0.05 |
| 12.50 22-Jan-26 | 13.93 | 13.56 | 0.00 |
| 16.29 17-Mar-27 | 13.84 | 13.69 | 0.05 |
| 13.98 23-Feb-28 | 13.87 | 13.61 | 0.00 |
| 12.15 18-Jul-34 | 14.12 | 14.00 | (0.01) |
| 12.40 18-Mar-36 | 14.08 | 13.87 | (0.05) |
| 16.2499 18-Apr-37 | 14.07 | 13.94 | 0.03 |
| 14.80 26-Apr-49 | 14.10 | 14.06 | (0.02) |
Source: Zedcrest Dealing Desk
Treasury Bills
Yields inched marginally higher by c.5bps in the T-bills market, as demand interest remained suppressed by the tighter system liquidity levels in the money market.
In anticipation of FAAC inflows early next week, we expect a slight compression in the T-bills yield curve.
| Benchmark Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 1-Aug-19 | 10.00 | 5.00 | 0.00 |
| 12-Sep-19 | 10.45 | 9.45 | 0.20 |
| 3-Oct-19 | 10.40 | 9.50 | (0.10) |
| 14-Nov-19 | 10.40 | 9.50 | (0.10) |
| 5-Dec-19 | 11.15 | 10.50 | 0.05 |
| 2-Jan-20 | 11.20 | 11.00 | (0.05) |
| 6-Feb-20 | 11.20 | 10.50 | 0.05 |
| 19-Mar-20 | 11.15 | 10.60 | 0.00 |
| 2-Apr-20 | 11.20 | 10.60 | 0.00 |
| 14-May-20 | 11.25 | 10.75 | 0.20 |
| 04-Jun-20 | 11.20 | 10.75 | 0.15 |
Source: Zedcrest Dealing Desk
Money Market
Rates in the money market rose higher by c.7pct, as outflows for FGN bond auction settlement pressured system liquidity lower. The OBB and OVN rates consequently ended the session at 21.86% and 23.21%, with system liquidity estimated to close at c.N90bn negative.
We expect rates to remain elevated opening the new week, as banks fund for a weekly wholesale FX auction by the CBN.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 21.86 | 14.29 |
| Overnight (O/N) | 23.21 | 15.00 |
Source: FMDQ, Zedcrest
FX Market
At the interbank, the Naira/USD rate remained stable at N306.90/$ (Spot) and N357.70/$ (SMIS). The NAFEX closing rate at the I&E window rose further by 7k to N361.97/$, whilst the market turnover rose by 70% to $295m. At the parallel market, the cash and transfer rates remained stable at N357.70/$ and N362.00/$ respectively.
| FX Market | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 306.90 | 306.90 |
| CBN SMIS | 357.70 | 357.70 |
| I&E FX Window | 361.97 | 361.91 |
| Cash Market | 357.70 | 357.70 |
| Transfer Market | 362.00 | 362.00 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Corps remained relatively stable, but with better sellers seen on the ETINL 24s, whilst the FIDBAN 22s remained mostly bid.
