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

Thursday, March 14, 2019 06:49 AM / Zedcrest Capital

***Nigeria,
India to expand $12bn investment***

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

$42.87bn

As at March 12, 2019. A c.0.12% increase
from $42.82bn on March 11, 2019

Brent Crude

$67.83pb

As at March 14, 2019. A c.0.74% increase from $67.33pb
on March 13, 2019

 

Bonds

The
FGN Bond Market traded with mixed sentiments, with slight sell on the 2023s and
2027s towards the close of trading pushing yields marginally higher by c.5bps
on the day. Demand however remained relatively firm on the 2028 bond.

 

We
expect yields to remain relatively stable, with declining T-bill yields
expected to support demand interests in the near term.
 















Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.65

14.26

0.00

16.39 27-Jan-22

14.61

14.31

0.02

12.75 27-Apr-23

14.67

14.43

0.23

14.20 14-Mar-24

14.46

13.94

0.04

13.53 23-Mar-25

14.71

14.31

0.14

12.50 22-Jan-26

14.40

14.26

(0.04)

16.29 17-Mar-27

14.45

14.27

0.09

13.98 23-Feb-28

14.31

14.33

(0.02)

12.15 18-Jul-34

14.34

14.11

0.09

12.40 18-Mar-36

14.26

14.13

0.01

16.2499 18-Apr-37

14.20

14.09

0.00

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market remained bullish on the back of the
signifcant downtrend in rates at the previous day’s NTB auction. Buying interests
were mostly focused on the long end of the curve which remained absent at the
OMO auction conducted by the CBN today.

Of the c.N213bn OMO bills that matured today, the CBN
sold a total of c.N400bn 91 and 175-day bills in a bid to mop up the excess
liquidity in the system. Due to the oversubcription at the auction compared to
the N350bn offered, the CBN cut the OMO stop rates further by c.6bps on the
91-day to 11.84% and by c.24bps on the 175-day to 13.20%.

We expect rates to remain relatively stable, with
market players expected to sustain demand amid a further decline in the OMO
clearing rates. We however expect slight selloff on the shortend of the curve,
as market players fund for the CBN’s bi-mothly retail FX auction tomorrow.





 






OMO  Auction
Result

Tenor

Rate (%)

Offer (N’bn)

Sub (N’bn)

Sale (N’bn)

91 day

11.84

50.00

62.05

50.75

175 day

13.20

300.00

367.45

349.73

Source: CBN





 















Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

4-Apr-19

12.50

9.00

0.00

2-May-19

11.50

10.00

0.00

13-Jun-19

12.00

11.00

0.40

18-Jul-19

12.70

11.95

0.00

1-Aug-19

12.10

11.85

(0.10)

12-Sep-19

13.20

12.95

(0.10)

3-Oct-19

13.40

13.10

0.05

14-Nov-19

13.15

13.05

(0.25)

5-Dec-19

13.15

13.00

(0.20)

2-Jan-20

12.90

12.75

(0.10)

6-Feb-20

12.80

12.65

(0.15)

Source: Zedcrest Dealing Desk

 

 

Money Market

Rates
in the money market inched slightly higher by c.2pct on the back of the
significant OMO sale by the CBN which compressed system liquidity to c.N160bn
from c.N300bn opening the day. The OBB and OVN rates consequently ended the
session at 10.67% and 11.58% respectively.

We
expect rates to trend higher tomorrow, as banks fund for a retail FX auction by
the CBN.






Money
Market Rates

 

Current
(%)

Previous
(%)

Open
Buy Back (OBB)

10.67

9.42

Overnight
(O/N)

11.58

10.00

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 weakened slightly by 0.02% to N360.36/$. At the
parallel market, the cash rate remained unchanged at N358.00/$, while the
transfer rate strengthened by 0.27% to N364.00/$.

 









FX
Market

 

Current
(N/$)

Previous
( N/$)

CBN
Spot

306.95

306.95

CBN
SMIS

356.92

356.92

I&E
FX Window

360.36

360.29

Cash
Market

358.00

358.00

Transfer
Market

364.00

365.00

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The NGERIA Sovereigns turned bullish in today’s session following
sustained gains in oil prices. Yields were consequently lower by c.3bps, with
the most demand witnessed on the 2038s.

 

The NGERIA Corps were relatively quiet except for slight interests
witnessed on the ACCESS and FBNNL 21s.

 

 

Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.

 

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