Market News

The CBN conducts a Special OMO Auction in anticipation of more fiscal spending - ZEDCREST CAPITAL

DECEMBER 07, 2018

*** Oil Prices Crash As OPEC+ Scrambles At 11th Hour, no deal announced at the end of today’s meeting ***

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.26%

As at November 21, 2018. A c.2bps down from 11.28% recorded in September 2018

MPR

14.00%

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

External Reserves

  $42.49bn     

As at December 5, 2018. A c.0.19% increase from $42.41bn on December 4, 2018

Brent Crude

 

$59.85pb 

As at December 6, 2018. A c.4.86% decrease from $62.91pb on December 5, 2018

 

Bonds

The FGN bond market traded on a quiet note with very little volume passing through on the day. Yields however compressed by c.3bps on the average across the curve, largely driven by a 10bps drop in yields on the FGN 2037s maturity.

 

The DMO today issued an offer circular for the N100bn 7-year Sukuk issue priced at 15.743%. With the offer open for the next two weeks, we expect the monthly FGN auction initially scheduled for next week (December 12, 2019) to be pushed further down in the month.

 

We maintain a bearish outlook on Bonds as investors’ price in the increased supply of Bonds coming from Sukuk issuance.

Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

15.24

14.90

(0.05)

14.50 15-Jul-21

15.69

15.32

(0.07)

16.39 27-Jan-22

14.99

14.79

(0.04)

14.20 14-Mar-24

15.29

15.07

(0.03)

12.50 22-Jan-26

15.84

15.72

0.00

16.29 17-Mar-27

15.80

15.71

0.00

13.98 23-Feb-28

16.03

15.89

0.00

12.15 18-Jul-34

15.80

15.59

0.00

12.40 18-Mar-36

15.80

15.69

(0.01)

16.2499 18-Apr-37

15.66

15.57

(0.10)

Source: Zedcrest Dealing Desk

 

 

Treasury Bills

The T-bills market continued on a bearish run today, as the CBN continued with its liquidity tightening strategy via the issuance of OMO T-bills. We saw spreads widened across the curve as sell off intensified especially on the short end of the curve. However, we saw some yield hunting by some local investors at the long-end but this was not enough to reverse the general weak market sentiment. Consequently, Yields remained flat on the average across quoted benchmark T-bills securities.

The CBN consequently rolled over the total amount of maturing OMO bills at today’s OMO auction, largely maintaining rates. The stop rates on the mid- (183-days) and long-end (351-days) maturities were maintained at 13.50% and 15.00% respectively, while the short-end (92-days) increased by 25bps to close at 11.90%. The CBN sold a total of c.N691.51 across the three maturities on offer, including special OMO sales of N287.73bn.

The CBN is expected to continue the issuance of OMO T-bills, however at a slow pace as market liquidity shrinks. We expect the market to close the week on a bearish note.

OMO Auction Result

Tenor

Rate (%)

Offer (₦’bn)

Sub (₦'bn)

Sale (₦'bn)

92-days

11.90

100.00

0.16

0.16

183-days

13.50

250.00

58.74

58.74

364-days

15.00

350.00

344.88

344.88

364-days (Special)

15.00

Nil

Nil

287.73

 

Benchmark FGN Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Jan-19

14.50

13.60

0.00

14-Feb-19

15.00

14.40

0.50

14-Mar-19

14.25

13.55

0.00

4-Apr-19

14.00

12.85

0.00

2-May-19

13.20

12.95

0.00

18-Jul-19

13.75

12.75

(0.05)

1-Aug-19

14.55

14.30

(0.05)

12-Sep-19

15.00

14.45

0.00

3-Oct-19

15.10

14.75

0.00

14-Nov-19

15.00

14.75

(0.10)

Source: Zedcrest Dealing Desk

 

 

Money Market

Money Market rates closed lower on the day, despite liquidity mop up by the CBN via the sale of OMO securities (c.N691.51bn). Open Buy-Back (OBB) and overnight (O/N) dropped to 7.79% (from 12.00%) and 8.71% (from 13.08%) respectively due to OMO maturities of c.N684.84bn. Consequently, System Liquidity is estimated to close in a positive territory of c.N208bn.

We expect rates to close the week higher as market participants provide funding for FX Retail interventions by the CBN.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

7.79

12.00

Overnight (O/N)

8.71

13.08

Source: FMDQ, Zedcrest Research

 

FX Market

At the Interbank market, the Naira/USD rate remained unchanged to close at N306.85/$ (spot) and N359.81/$ (SMIS). Value traded at the I&E FX window dipped up today with a total trade turnover of $223.63 traded in 338 deals, with rates ranging between N351.00/$ - N366.00/$. The NAFEX closing rate depreciated by c.0.14% to close at N365.19/$ from N364.65/$ previously.

 

The naira pared some gains from the previous session at the parallel markets, as the cash rate depreciated by c. 0.82% to close at N368.00/$ (from N365.00/$ previously. The transfer rate remained stable at N370.00/$.

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.85

306.85

CBN SMIS

359.16

359.16

I&E FX Window

365.16

364.65

Cash Market

368.00

365.00

Transfer Market

370.00

370.00


 

Eurobonds

Sub-Saharan sovereign Eurobonds weakened amidst crashes in global oil prices from failure of OPEC+ to agree a supply cut deal as well as a slump in U.S. stock prices from increased trade tensions with China. The NGERIA Sovereign Eurobonds also witnessed negative sentiments across the curve, as yields ticked higher by c.13bps on the average across the curve, for a third consecutive trading session.

 

The NGERIA Corps also weakened, underperforming their sovereign counterparts. We saw sell interests on the FIDBAN 22s, UBANL 22s and Zenith 22s which saw their yields rise by c.29bps, c.35bps and 25bps respectively. DAIMBK 19s continue to push through the negativity, as investor demand pushed yields lower by c.105bps on the paper.

 

 

 

Contact us:

Dealing Desk: 01-6311667 | Dayo: 07032208237 | Seyi: 08023231396 | Nnamdi: +2348133385000 | Tosin: +2347039394376   

Email: research@zedcrestcapital.com

 

Disclaimer:

Whilst proper and reasonable care has been taken in the preparation and accuracy of the facts and figures presented in this report, no responsibility or liability is accepted by Zedcrest Capital or its employees for any error, omission or opinion expressed herein. This report is not an investment research or a research recommendation and should not be regarded as such. The information provided herein is by no means intended to provide a sufficient basis on which to make an investment decision.

 

SEE HOW MUCH YOU GET IF YOU SELL

NGN
Real Time Analytics