Funding Rates Spike to 1-yr High as CBN Further Tightens Liquidity with FX Sale
World Bank unveils fresh N2.7 trillion investment strategy in Nigeria for 2019
KEY INDICATORS
| Inflation | 13.34% | Declined by 0.99% inMarch from 14.33% in February 2018 |
| MPR | 14.00% | Left unchanged at 14.00% at the MPC meeting 0n 4April 2018 |
| External Reserves | $47.87billion | Accreted 1.52% as at 10 May from $47.85bn as at 9May 2018 |
| Brent Crude | $77.42pb | Rose by0.19% from $77.27pb on 11 May 2018 |
Bonds
The bond market opened the week on a relatively calm note, as it eased off slightly from the selling pressures witnessed in the previous week. Yields consequently declined by c.8bps on average, with most trades done on the 2021 and 2034 bonds.
We expect yields to compress slightly in the near term, as market players anticipate a further decline in inflation in the CPI report to be published Thursday.
| FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 16.00 29-Jun-19 | 11.75 | 11.47 | (0.30) |
| 15.54 13-Feb-20 | 13.22 | 13.03 | 0.09 |
| 14.50 15-Jul-21 | 13.48 | 13.41 | (0.08) |
| 16.39 27-Jan-22 | 13.40 | 13.26 | (0.12) |
| 14.20 14-Mar-24 | 13.33 | 13.27 | (0.10) |
| 12.50 22-Jan-26 | 13.43 | 13.26 | (0.04) |
| 16.29 17-Mar-27 | 13.39 | 13.30 | (0.02) |
| 12.15 18-Jul-34 | 13.32 | 13.27 | (0.12) |
| 12.40 18-Mar-36 | 13.30 | 13.21 | (0.04) |
| 16.25 18-Apr-37 | 13.22 | 13.15 | (0.04) |
Source: Zedcrest Dealing Desk
Treasury Bills
The selling pressures in the T-bills space also moderated slightly, as some local and offshore investors began cherry-picking on some of the higher yielding bills, consequently absorbing most of the sell off from the local banks who were looking to generate more liquidity for funding of their wholesale FX bids and trade positions.
We expect yields to decline further ahead of the next OMO T-bill maturity, as they are relatively attractive at current levels, with most of the bills being offered at c.60 – 90bps above the last OMO rate.
| Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14-Jun-18 | 13.50 | 12.00 | 0.00 |
| 5-Jul-18 | 14.00 | 13.00 | 0.00 |
| 2-Aug-18 | 14.00 | 13.00 | 0.50 |
| 13-Sep-18 | 13.00 | 12.50 | 0.00 |
| 4-Oct-18 | 13.00 | 12.50 | 0.00 |
| 1-Nov-18 | 13.50 | 12.50 | 0.00 |
| 6-Dec-18 | 13.00 | 12.50 | 0.25 |
| 3-Jan-19 | 13.00 | 12.50 | 0.00 |
| 14-Feb-19 | 12.50 | 11.50 | 0.00 |
| 14-Mar-19 | 12.50 | 11.00 | 0.00 |
| 4-Apr-19 | 12.50 | 11.00 | 0.00 |
Source: Zedcrest Dealing Desk
Money Market
The OBB and OVN rates spiked to a 1-yr high of 150% and 164.17%, as system liquidity which opened at c.N2bn short was further compressed by an FX intervention by the CBN ($210m) for wholesale, SME and Invisible transactions. We expect rates to moderate slightly tomorrow, as there are no significant outflows expected from the system.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 150.00 | 65.00 |
| Overnight (O/N) | 164.17 | 73.42 |
Source: FMDQ, Zedcrest Research
FX Market
The Interbank rate remained stable at its previous rate of N305.80/$, even as the CBN intervened in the market with a total sale of $210m. The NAFEX closing rate depreciated sharply by 0.14% to a YTD high of N361.57/$. Rates in the Unofficial market also depreciated by 0.06% to N361.70/$.
| FX Rates | |||||||||||
| Current (N/$) | Previous ( N/$) | ||||||||||
| CBN Spot | 305.80 | 305.80 | |||||||||
| CBN SMIS | 330.00 | 330.00 | |||||||||
| I&E FX Window | 361.57 | 361.05 | |||||||||
| Parallel Market | 361.70 | 361.50 | |||||||||
Source: CBN, FMDQ, REXEL BDC
Eurobonds
The NGERIA Sovereigns remained slightly bullish, with yields compressing by c.2bps across the curve. We witnessed most trades on the 2027s and 2038s which gained +0.30pt on average.
The NGERIA Corps were also bullish with interests mostly on the longer dated tickers. The UBANL 22s, FIDBAN 22s and SEPLLN 23s were the highest gainers as their yields declined by c.10bps on average, with average price gains of +0.40pt.
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.
