Funding Rates Spike to YTD High as CBN Drains System Liquidity into Negative

Monday, February 11,  2019  07:10 PM / Zedcrest Capital

***CBN, judiciary collaborate to close
N48tr MSMEs financing gap***

KEY
INDICATORS







Indicator

Value

Commentary

Inflation

11.44%

As at January 16, 2019. A c.16bps increase
from 11.28% recorded in November 2018

MPR

14.00%

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

External Reserves

$42.95bn

As at February 8, 2019. A c.0.05% decrease
from $42.97bn on February 7, 2019

Brent Crude

$61.95pb

As at February 11, 2019. A c.0.62% decrease from $61.57pb
on February 8, 2019

 

Bonds

The
Bond market opened the week on a quieter note, with yields trending lower by
c.4bps due to continued buying interests witnessed on the mid to long end of
the curve at the start of the session. We however witnessed slight profit taking
on the 2028s which was sold back to 14.81% having reached a low of 14.71% in
the early hours of trading.

 

Whilst
we expect improved results from the Q4 2018 GDP figures to be released tomorrow
and inflows from bond coupon payments of c.N47bn on Wednesday, we expect that
market players would continue to trade cautiously in light of the uncertainties
around the forthcoming elections.

 














Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

14.98

14.16

(0.06)

14.50 15-Jul-21

14.99

14.58

0.00

16.39 27-Jan-22

14.87

14.33

(0.02)

14.20 14-Mar-24

14.59

14.19

0.03

12.50 22-Jan-26

14.73

14.55

(0.01)

16.29 17-Mar-27

14.75

14.58

(0.02)

13.98 23-Feb-28

14.82

14.77

(0.11)

12.15 18-Jul-34

14.65

14.53

(0.04)

12.40 18-Mar-36

14.68

14.59

(0.06)

16.2499 18-Apr-37

14.51

14.39

(0.06)

Source: Zedcrest Dealing Desk

 

Treasury Bills

The T-bills
market turned slightly bearish as market players reacted to the liquidity
squeeze from the OMO and wholesale FX sale by the CBN today. Yields
consequently trended higher by c.5bps on the day, following slight selloff on
the short end of the curve. Despite the system illiquidity, client demand
remained strong for the 360-day OMO bill offered by the CBN, which recorded a
total sale of c.N35bn of the 10bn offered on the Tenor.

We expect the
T-bill rates to remain elevated due to the liquidity squeeze in the money
market, whilst a further OMO auction by the CBN will likely force rates higher.

 
















Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

14-Feb-19

12.50

10.00

(1.00)

14-Mar-19

12.50

10.00

0.50

4-Apr-19

11.25

11.10

0.10

2-May-19

11.50

10.00

(1.45)

13-Jun-19

12.95

11.75

(0.80)

18-Jul-19

12.95

12.75

(0.35)

1-Aug-19

14.50

14.30

(0.25)

12-Sep-19

14.80

14.50

(0.10)

3-Oct-19

14.95

14.80

0.00

14-Nov-19

14.90

14.80

(0.10)

5-Dec-19

15.00

14.75

0.00

2-Jan-20

15.00

14.90

0.00

Source: Zedcrest Dealing Desk

 

 

 

Money Market

Rates
in the money market spiked significantly as system liquidity which opened the
session in negative territory of c.N127bn negative was further aggravated by
the OMO (c.N37bn) and Wholesale FX sales (c.$210m) by the CBN. The OBB and OVN
rates consequently ended the session at an YTD high of 43.33% and 47.50%
respectively, as banks were not able to access the CBN’s SLF to fund their
deficits.

We
expect rates to trend lower tomorrow, as banks would be able to access the
CBN’s SLF window to fund their obligations at cheaper rates.






Money
Market Rates

 

Current
(%)

Previous
(%)

Open
Buy Back (OBB)

43.33

18.67

Overnight
(O/N)

47.50

19.42

Source: FMDQ, Zedcrest Research

 

 

FX Market

At the Interbank, the Naira/USD rate remained
unchanged at N306.70/$ (spot) and N357.10/$ (SMIS). The NAFEX rate in the
I&E window depreciated further by c.0.06% to N361.95/$, whilst the cash and
transfer rates at the parallel market remained unchanged at N359.00/$ and N365.00/$
respectively.

 









FX
Market

 

Current
(N/$)

Previous
( N/$)

CBN
Spot

306.70

306.70

CBN
SMIS

357.10

357.10

I&E
FX Window

361.95

361.73

Cash
Market

359.00

359.00

Transfer
Market

365.00

365.00

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds

The NGERIA Sovereigns remained slightly bearish in today’s session,
with yields rising further by c.6bps as a slightly stronger US dollar, lower
oil price, and renewed trade uncertainties continue to place a dent on the
recent EM resurgence.

 

In the NGERIA Corps, yields were relatively flat across board, with
investors maintaining a slightly bearish bias on the DIAMBK 19s and UBANL 22s.

 

 

Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.

 

 

Related
News

1.      
January 2019 FGN
Bond Auction Oversubscribed

2.     
Money Market Rate Increased As Overnight Rate Rose To
11.86%

3.     
Flour Mills Commercial Paper Offers 14.75% Yield; Offer
Closes On Wednesday

4.     
Monthly Fixed Income Review For January 2019

5.     
Bond Market Maintains Bullish Trend as Panic Buying Sets
In

6.     
NAFEX Rate Appreciates to Six Month High Amid Renewed FPI
Inflows

7.     
A Quiet Trading Session as Daily OMO Auction Takes Centre
Stage

8.    
Market Players Oversubscribe CBN OMO Amid Increased Demand
on Short Tenor Bills

9.     
NSP-SPV Plc Up to N10Billion 15-Year Series 1 Guaranteed
Fixed Rate Senior Green Infrastructure Bond

10.  Buoyant
Liquidity Level Spurs Buying Interest as Average Yield Compresses to 13.2%WoW

11.   Bond Market Closed On A Bullish Note With Increased Demand
Seen On Most Maturities

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.