Funding Rates Spike as CBN Mops up System Liquidity with c.N454bn OMO Sale
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KEY INDICATORS
| Inflation | 13.34% | Declined by 0.99% in March from 14.33% in February 2018 |
| MPR | 14.00% | Left unchanged at 14.00% at the MPC meeting 0n 4 April 2018 |
| External Reserves | $47.85billion | Accreted 1.52% as at 9 May from $47.83bn as at 8 May 2018 |
| Brent Crude | $76.65pb | Fell by 0.25% from $76.84pb on 9 May 2018 |
Bonds
The bond market witnessed slight pullback in yields following a slowdown in offshore profit taking and renewed buying interest from local clients. Yields consequently compressed by c.7bps on average.
We, however, note that yields rose slightly from their intra-day lows following release of the OMO auction result in which all subscriptions were filled by the CBN. We expect the market to close the week on a slightly weaker note, as most buying interests would be constrained by the tight system liquidity and the relatively higher yields in the T-bills space.
| FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 16.00 29-Jun-19 | 11.82 | 10.65 | (0.25) |
| 15.54 13-Feb-20 | 13.07 | 12.03 | 0.05 |
| 14.50 15-Jul-21 | 13.54 | 12.71 | (0.06) |
| 16.39 27-Jan-22 | 13.45 | 13.30 | 0.01 |
| 14.20 14-Mar-24 | 13.26 | 12.94 | (0.05) |
| 12.50 22-Jan-26 | 13.34 | 13.28 | (0.06) |
| 16.29 17-Mar-27 | 13.34 | 13.28 | (0.09) |
| 12.15 18-Jul-34 | 13.35 | 13.25 | (0.01) |
| 12.40 18-Mar-36 | 13.25 | 13.14 | (0.05) |
| 16.25 18-Apr-37 | 13.18 | 13.04 | (0.15) |
Source: Zedcrest Dealing Desk
Treasury Bills
The T-bills market turned significantly bearish, with yields rising higher by c.40bps across the curve. This came as market players repriced their quotes following the significant OMO sale (c.N454bn) by the CBN at a 5bps higher rate on both maturities.
We expect the market to remain significantly bearish tomorrow, due to the tight system liquidity and expected outflows for retail FX funding by banks.
| Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14-Jun-18 | 12.60 | 11.10 | 0.60 |
| 5-Jul-18 | 13.00 | 11.50 | 0.40 |
| 2-Aug-18 | 12.30 | 10.80 | 0.30 |
| 13-Sep-18 | 12.00 | 11.50 | 0.50 |
| 4-Oct-18 | 12.00 | 11.50 | 0.50 |
| 1-Nov-18 | 12.50 | 11.50 | 0.50 |
| 6-Dec-18 | 12.20 | 11.80 | 0.45 |
| 3-Jan-19 | 12.15 | 11.90 | 0.15 |
| 14-Feb-19 | 12.30 | 11.45 | 0.30 |
| 14-Mar-19 | 12.20 | 10.20 | 0.20 |
| 4-Apr-19 | 12.15 | 10.15 | 0.15 |
Source: Zedcrest Dealing Desk
| OMO Auction Result | ||||
| Tenor | Rate (%) | Offer (NBn) | Sub (N’bn) | Sale (N’bn) |
| 105 day | 11.05 | 50.00 | 2.98 | 2.98 |
| 231 day | 12.15 | 200.00 | 451.18 | 451.18 |
Source: CBN
Money Market
The OBB and OVN rose significantly higher to 16.67% and 18.88% respectively. This came on the back of the significant OMO sale by the CBN, which is estimated to take system liquidity to a net negative position for the first time since on the 6th of December 2017.
We expect rates to remain elevated tomorrow, as banks look to fund for their retail FX bids, which is estimated to result in a net outflow of funds despite expected refunds from the previous retail FX sales.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 16.67 | 7.08 |
| Overnight (O/N) | 18.88 | 7.75 |
Source: FMDQ, Zedcrest Research
FX Market
The Interbank rate remained stable at its previous rate of N305.75/$, with the CBN’s external reserves recorded to have improved by 1.52% to $47.85bn as at 9-May. The NAFEX rate depreciated further by 0.14% to N361.36/$, while rates in the Unofficial market remained stable at N361.50/$.
| FX Rates | ||
| Current (N/$) | Previous ( N/$) | |
| CBN Spot | 305.75 | 305.75 |
| CBN SMIS | 330.00 | 330.00 |
| I&E FX Window | 361.36 | 361.14 |
| Parallel Market | 361.50 | 361.50 |
Source: CBN, FMDQ, REXEL BDC
Eurobonds:
The NGERIA Sovereigns recovered significantly from the intense bearish pressures witnessed in previous sessions. This was following renewed investor demand especially on the 27s, 38s and 47s which gained as much as +2.00pt. Yields consequently compressed by c.16bps across the curve.
The NGERIA Corps also posted significant recoveries across almost all traded tickers, with the exception of the ZENITH 22s which remained slightly bearish. The FBNNL 21s, FIDBAN 22s and SEPLLN 23s were the top gainers, with gains of +0.27pt, +0.55pt and +0.75pt respectively.
