Bond Market Trades Flat, Despite Inflation Dip

Friday, March 15, 2019 0730 PM / Zedcrest Capital

***Nigeria’s
Inflation drops to 11.31% in February 2019*** – NBS

KEY
INDICATORS







Indicator

Value

Commentary

Inflation

11.31%

As at March 15, 2019. A c.6bps decline
from 11.37% recorded in January 2019

MPR

14.00%

Left Unchanged for the 15th
Consecutive Time at the Jan. 22, 2019 MPC Meeting

External Reserves

$42.98bn

As at March 14, 2019. A c.0.12% increase
from $42.93bn on March 13, 2019

Brent Crude

$66.98pb

As at March 15, 2019. A c.1.25% decrease from $67.83pb
on March 14, 2019

 

Bonds

The
FGN Bond Market traded on a relatively flat note, with no active trades
recorded during the session, even as market reaction to the inflation release
by the NBS remained relatively muted.

 

Despite
the c.N91bn expected in coupon payments in the coming week, we expect yields to
remain relatively flat, as market players look forward to the FGN bond auction
scheduled to hold in the last week of the month.





 


















Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.73

14.21

0.08

16.39 27-Jan-22

14.58

14.39

(0.03)

12.75 27-Apr-23

14.62

14.46

(0.05)

14.20 14-Mar-24

14.37

13.96

(0.09)

13.53 23-Mar-25

14.61

14.32

(0.10)

12.50 22-Jan-26

14.43

14.27

0.03

16.29 17-Mar-27

14.44

14.25

(0.01)

13.98 23-Feb-28

14.34

14.24

0.03

12.15 18-Jul-34

14.34

14.18

0.00

12.40 18-Mar-36

14.26

14.15

0.00

16.2499 18-Apr-37

14.21

14.11

0.01

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market traded on a relatively quiet note,
as demand interests were dampened by funding pressures from the Retail FX
auction by the CBN. Yields were consequently higher by c.10bps on the day.

We expect the market to remain stable in the near term,
as the CBN is expected to maintain its spate of OMO issuances to control excess
system liqudity when necessary.




We also expect the relatively robust
demand interests for T-bills to be sustained in the coming week.





 


















Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Apr-19

13.00

9.00

0.50

2-May-19

11.40

10.00

(0.10)

13-Jun-19

11.65

11.45

(0.35)

18-Jul-19

12.50

11.90

(0.20)

1-Aug-19

12.10

11.85

0.00

12-Sep-19

13.20

13.00

0.00

3-Oct-19

13.20

13.10

(0.20)

14-Nov-19

13.25

13.00

0.10

5-Dec-19

13.20

13.10

0.05

2-Jan-20

13.00

12.75

0.10

6-Feb-20

12.75

12.60

(0.05)

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates
in the money market were relatively unchanged from previous levels as refunds
from a prior retail FX sale moderated funding pressures from the retail FX
auction by the CBN today. The OBB and OVN rates consequently ended the session
at 11.17% and 11.67% respectively, with system liquidity estimated to close the
week at c.N100bn positive.

We
expect rates to trend slightly higher opening next week, due to expected
outflows for a weekly wholesale FX sale by the CBN






Money
Market Rates

 

Current
(%)

Previous
(%)

Open
Buy Back (OBB)

11.17

10.67

Overnight
(O/N)

11.67

11.58

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, the Naira/USD rate remained
unchanged at N306.95/$ (Spot) and N356.92/$ (SMIS). The NAFEX closing rate in
the I&E window however appreciated by 0.02% to N360.18/$, while the cash and
transfer rates at the parallel market remained unchanged at N358.00/$ and N364.00/$
respectively.

 









FX
Market

 

Current
(N/$)

Previous
( N/$)

CBN
Spot

306.95

306.95

CBN
SMIS

356.92

356.92

I&E
FX Window

360.18

360.36

Cash
Market

358.00

358.00

Transfer
Market

364.00

364.00

Source: CBN, FMDQ, REXEL BDC 

 

 

Eurobonds

The NGERIA Sovereigns remained slightly bullish, with yields
compressing further by c.3bps on the day. We witnessed the most interests on
the 2032s, which gained c.1pct on the day.

 

In the NGERIA Corps, we witnessed slight sell on the ECOTRA 21s and ZENITH
22s.

 

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Related News

 

1.      
CBN Delivers
Further Cut to Stop Rate in c.N400bn OMO Sale

2.     
Robust Demand Sees Significant Drop in T-bills Yields at
The PMA

3.     
One Year T-bill to Clear Significantly Lower at PMA
Tomorrow

4.     
Nigerian Eurobonds Turn Bullish as Oil Prices Move Higher

5.     
Increased OMO Mop-Ups by CBN Drive T-Bills Average Yield
up to 13.5% as PMA Holds this Wednesday

6.     
Money Market Rate Decreased As Overnight Rate Fell To
10.08%

7.     
Monthly Fixed Income Review For February 2019

8.    
T-Bill Yields Trend Lower as CBN Holds off on Long Tenor
OMO Offer

9.     
Fixed Income
Monthly Update February 2019 – Lower Yields To Take Center Stage

10.  Bond Yields Tick Higher as Demand Interests Wane

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.