Treasury Bills

The strong demand for the dollar persisted in the I & E window during yesterday’s trading
session. 98% of the trades settled between N360-N362 per dollar, up from 96% in the previous session. This is reflective of the intensity of the demand for the dollar. As a result, the naira depreciated by 12 kobo at the I & E window to settle at N360.80 per dollar, despite closing flat at the official market (N306.95/$).

Interbank market – The turnover in the I & E window was higher on the day by 75% at US$203 million from US$116 million in the previous trading session. The interbank market opened with a liquidity of N82 billion, up from N64 billion the day before. System liquidity was bolstered by N54 billion worth of bill maturities and refunds from the retail FX auction that was conducted last week. In consequence, the money market rates- Open Buy Back (OBB) and Overnight (O/N) rates- moderated by c.500bps to close at 10.07% and
10.71% respectively

Bonds– It was a moderately bullish session in the bonds market yesterday as yields on the
benchmarks compressed by c.12bps on the day. However, yields were still around 14%
levels. Investors were more bullish on the short-intermediate maturities (2-6 TTM) as yields on that end fell by an average of 31bps. The yield on the 2021 bond (2.3 TTM) declined by 61bps inter-day while the yields on the 2022 and 2023 bonds dropped by 31bps and 36bps apiece. In contrast to the short-mid tenors, investors were slightly bearish on the long end of the curve with the yield on the 2036 bond rising by 11bps on the day. In yesterday’s session, investors traded N4.4 billion worth of the 2025 bond, pushing its yield lower by 27bps to close at 13.99%. Also, the 2023 and 2034 bonds each recorded trades in excess of N3 biillion.

Treasury Bills – Activity in the t-bills market was relatively muted as yields inched slightly higher by c.3bps. Investors were pretty quiet at market open in anticipation of an OMO sale by the CBN. In the event that the CBN did not float an OMO auction the t-bills market picked up momemtum, particularly on the intermediate-long tenored instruments.

Although they are not benchmark bills, trades on the 27th

-February bill (336 DTM) were valued at about N47 billion while the 5th
-September bill (161 DTM) recorded trades worth N28 billion. Yields on the 3rd
-October and 2nd
-January bills rose by 15bps and 25bps respectively while the yield on the 6th
-February bill compressed by 13bps in yesterday’s session.

Forecast – Today, we expect trading in the bond market to be relatively muted with thin volumes traded. We also expect the FAAC disbursement to hit the system today, prior to the start of the new month. On the back of this, we anticipate a slightly bullish session in the t-bills market.

In addition, we expect money market rates to inch higher today due to outflows
from the settlement of bond auction allotments, a tentative OMO issue and banks’ funding
provision for the retail FX auction. In the currencies market, we expect the naira exchange
rate to be relatively stable against major currencies.


CSL STOCKBROKERS LIMITED CSL Stockbrokers,

Member of the Nigerian Stock Exchange,

First City Plaza, 44 Marina,

PO Box 9117,

Lagos State,

NIGERIA.

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