Nigerian Bond Yields Tick Higher Ahead of Auction Tomorrow

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W’Bank, Others Raise $1.57bn for TCN to Expand Grid to 20,000MW in 4 Years***

KEY INDICATORS

Inflation 11.61% Declined by 0.87% in May from 12.48% in April 2018
MPR 14.00% Left unchanged at 14.00% at the MPC meeting 0n 4 April 2018
External Reserves $47.63billion Rose by 0.42% as at 13 June from $47.43bn as at 7 June 2018
Brent Crude $76.15pb Rose by 2.74% from $74.12pb on 26 June 2018

 

 

Bonds

The bond market traded remained bearish, with yields ticking slightly higher by c.2bps on average. This was following continued selloffs on the medium to long end of the curve ahead of the auction tomorrow. We however witnessed some local client demand on the short end of the curve which slightly moderated the overall market bearishness. We expect the market to be relatively quiet tomorrow, as market players focus on the bond auction which we expect to clear at c.10 – 20bps above the previous stop rate.

 

FGN Bonds
Description Bid (%) Offer (%) Day Change (%)
16.00 29-Jun-19 12.82 12.45 (0.28)
15.54 13-Feb-20 13.08 12.37 (0.14)
14.50 15-Jul-21 13.55 13.26 0.09
16.39 27-Jan-22 13.66 13.15 0.00
14.20 14-Mar-24 13.56 13.29 0.09
12.50 22-Jan-26 13.92 13.80 0.12
16.29 17-Mar-27 13.86 13.70 0.11
13.98 23-Feb-28 13.90 13.64 0.05
12.15 18-Jul-34 14.03 13.91 0.02
12.40 18-Mar-36 14.05 13.93 0.11
16.2499 18-Apr-37 13.97 13.73 0.09

Source: Zedcrest Dealing Desk

 

 

FGN Bond Auction Expectations

Maturity Offer (N’bn) Expected Stop Rate (%) Previous Stop Rate (%)
12.75% FGN APR 2023 20.00 13.60 – 13.80 13.50
13.53% FGN MAR 2025 20.00 13.60 – 13.80 13.50
13.98% FGN FEB 2028 20.00 13.70 – 13.90 13.55

Source: Zedcrest Research 

 

Treasury Bills

The T-bill market traded on a bearish note with some selloff, mostly on the shorter end of the curve (Jul – Nov) which rose by c.30bps on average. This was following a squeeze in system liquidity coming from the OMO and FX sale in the previous session. Yields consequently rose by c.13bps to 13.00% avg.  We expect yields to be relatively flat tomorrow as market players await inflows from OMO maturities and possible FAAC payments later in the week to moderate funding pressures in the system.

 

Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
5-Jul-18 13.25 12.25 0.25
2-Aug-18 12.60 12.35 0.10
13-Sep-18 12.50 11.80 0.10
4-Oct-18 12.50 12.30 0.10
1-Nov-18 12.50 12.35 0.00
6-Dec-18 12.50 12.35 0.00
3-Jan-19 12.30 12.00 0.00
14-Feb-19 12.30 12.00 0.00
14-Mar-19 12.30 11.80 0.00
4-Apr-19 12.30 10.00 0.00

Source: Zedcrest Dealing Desk

 

Money Market

The OBB and OVN rates rose significantly higher by c.20pct to  31.57% and 38.00%, with system liquidity (estimated at c.N200bn positive) skewed towards a fewer number of banks. We expect rates to be relatively flat tomorrow, but to trend slightly lower in subsequent sessions, due to expected inflows from FAAC and OMO maturities (Thursday/Friday).

 

Money Market Rates
  Current (%) Previous (%)
Open Buy Back (OBB) 31.57 11.33
Overnight (O/N) 38.00 12.83

Source: FMDQ, Zedcrest Research 

 

 

FX Market

The Interbank rate remained stable at its previous rate of N305.80/$. The I&E FX rate depreciated by 0.13% to N361.31/$. In the parallel market, cash rates remained stable at N360.00/$, while the transfer rate appreciated by 50k to N364.00/$.

 

FX Market
  Current (N/$) Previous ( N/$)
CBN Spot 305.80 305.80
CBN SMIS 330.00 330.00
I&E FX Window 361.31 360.85
Cash Market 360.00 360.00
Transfer Market 364.00 364.50

Source: CBN, FMDQ, REXEL BDC

 

 

Eurobonds:

The NGERIA Sovereigns traded on a bearish note with yields ticking higher by c.10bps on average. We witnessed the most selloff on the 27s and 47s which lost –0.75pt and –1.30pt respectively.

 

The NGERIA Corps were slightly bullish, with gains recorded on most of the traded tickers except for the UBANL 22s and Zenith 19s. We witnessed the most gains on the FBNNL 20s and ECOTRA 21s which rose by +0.70pt and +0.40pt respectively.

 

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