Rising Oil Prices Sustain Demand for Nigerian Eurobonds

 Wednesday, January 09, 2018/ 06:30PM / Zedcrest Capital

***World Bank Projects 2.2% GDP Growth for Nigeria in
2019***

KEY
INDICATORS







Indicator

Value

Commentary

Inflation

11.28%

As at December 14, 2018. A c.2bps increase from 11.26% recorded
in October 2018

MPR

14.00%

Left Unchanged for the 12th Consecutive Time at the
Nov. 22, 2018 MPC Meeting

External Reserves

$43.05bn

As at January 7, 2018. A c.0.02% increase from $43.04bn on January
3, 2018

Brent Crude

$60.09pb

As at January 9, 2019. A c.2.74% increase from $58.49pb on January 8, 2018

 

Bonds

The Bond market remained scantily traded, but with some profit
taking on the 37s lifting yields marginally higher by c.1bp, despite the
continued interests around the mid tenors.

 

We expect the market to remain relatively flat in the near term,
with yields expected to gain support at these levels.

 














Benchmark
FGN Bonds

Description

Bid (%)

Offer (%)

Day Change
(%)

15.54 13-Feb-20

15.03

14.47

0.05

14.50 15-Jul-21

15.51

15.29

0.02

16.39 27-Jan-22

15.09

14.83

0.00

14.20 14-Mar-24

15.10

14.87

0.01

12.50 22-Jan-26

15.57

15.48

(0.03)

16.29 17-Mar-27

15.50

15.40

0.03

13.98 23-Feb-28

15.53

15.44

(0.01)

12.15 18-Jul-34

15.50

15.30

0.00

12.40 18-Mar-36

15.53

15.30

(0.02)

16.2499 18-Apr-37

15.40

15.35

0.04

Source: Zedcrest Dealing
Desk
 

 

Treasury
Bills

The
T-bills market traded on a slightly bullish note, in the absence of an OMO
auction by the CBN. We witnessed the most interests around the mid tenors
(Jun/July) as some market players looked to stockpile (in anticipation of
client demand on the mid tenured bills) at the relatively more attractive rates
in the secondary market.

We expect
yields to trend slightly higher tomorrow, especially on the longer end of the
curve, as the CBN is expected to conduct an OMO auction to mop up c.N375bn in
maturing OMO bills.



















Treasury Bills

Description

Bid (%)

Offer (%)

Day Change
(%)

14-Feb-19

15.50

14.40

(0.25)

14-Mar-19

15.00

14.15

0.00

4-Apr-19

13.50

12.60

0.40

2-May-19

13.75

13.15

(0.05)

13-Jun-19

13.65

13.35

0.00

18-Jul-19

13.65

13.35

(0.05)

1-Aug-19

13.90

13.60

(0.35)

12-Sep-19

14.95

14.60

(0.10)

3-Oct-19

14.95

14.50

(0.10)

14-Nov-19

14.95

14.65

(0.10)

5-Dec-19

15.00

14.85

0.00

Source:
Zedcrest Dealing Desk
 

 

 

Money
Market

Rates in the
money market remained elevated, with the OBB and OVN rates closing the day at 26.67%
and 27.67%, as there were no significant inflows to bolster system liquidity
which opened the day in negative territory of c.N113bn.

We expect rates
to moderate sharply tomorrow, on the back of inflows from OMO maturities. This
is however barring a significant OMO mop up by the CBN.

 






Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

26.67

25.00

Overnight (O/N)

27.67

27.25

Source: FMDQ, Zedcrest
Research
 

 

 

FX Market

At the Interbank, the Naira/USD rate
remained unchanged at N306.90/$ (spot) and N358.13/$ (SMIS). The NAFEX rate in
the I&E window appreciated from a three-day losing streak by c.0.27% to N364.90/$
from N365.87/$ previously. At the parallel market, the cash and transfer rates depreciated
by c.0.19% and c.0.27% to N360.50/$ and N365.00/$ respectively.

 









FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.90

306.90

CBN SMIS

358.31

358.31

I&E FX Window

364.90

365.87

Cash Market

360.50

359.80

Transfer Market

365.00

364.00

Source: CBN, FMDQ, REXEL
BDC

 

 

Eurobonds

The NGERIA Sovereigns resumed its recent
rally as oil prices maintained their longest gaining streak in 2-yrs. The
yields curve consequently compressed further by c.10bps on average, culminating
in a c.65bps rally in the last four sessions.

 

In the NGERIA Corps, investors were
significantly bullish on the Zenith 19s and 22s as the bank outlined its retail
financial strategy for the year. We also witnessed renewed interests for the
DIAMBK 19s, Access 21s snr and UBANL 22s.

 

Proshare Nigeria Pvt. Ltd.

 

 

Proshare Nigeria Pvt. Ltd.

 

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2.      T-Bills Market Reverses Bullish Run as Average Rate
Advances to 14.3%

3.      January 2019 FGN Savings Bonds Offer For Subscription

4.      EBRD Issues Debut €600 Million 5-Year Global Green Bond

5.      Investors Rally Nigerian Eurobonds as Oil Prices Push
Higher

6.      Positioning For Headwinds – Zedcrest 2019 Fixed Income
Outlook

7.      T-Bills Market Trades Bearish as Market Players anticipate
Retail FX Funding

8.     Bond Yields Retrace Sharply, As DMO Resumes NTB Auction
Sales

9.      Despite Year End Funding Pressures, CBN Maintains OMO and
FX Interventions

10.  Naira Crashes Below N360 Per Dollar at the Parallel Market
as External Reserves Resume Downtrend

11.   Demand Pressures Force c.50bps Rally on 2024 FGN Bond

12.  Money Market
Rate Decreased As Overnight Rate Fell to 25.08%

 

 

 Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.