15/5/2018/Zedcrest Capital
Bond
The bond market traded on a relatively flat note, as initial bullish sentiments following release of the April inflation results were offset by some profit taking by offshore clients especially on the 27s and 37s. Yields consequently declined marginally by c.3bps across the curve, as market players showed more preference for the higher yields in the T-bills space. We expect some demand to gradually flow into the bond space, as yields on T-bills have begun to retreat from their recent one-month highs. This however barring continued sell-off from offshore.
Treasury Bills
Yields in the T-bills space crashed by c.70bps down to c.12.91% from a one-month high of c.13.64% recorded in the previous session. This was as banks were relieved of the intense funding pressures from their wholesale FX bids in the previous session. We also witnessed significant client demand for bills especially on the 6-Dec, 22-Nov and 3-Jan maturities, and also on the next 91 and 182-day bills (16-Aug and 15-Nov) which were trading at c.150bps above their last PMA rate. We expect a further decline in yields ahead of the next OMO maturity on Thursday, just as we expect rates at the PMA tomorrow to clear around 11% discount levels, due to significantly low volumes on offer (c.N34bn in total).
Money Market
The OBB and OVN rates crashed significantly to 15.33% and 16.42%, from their one year highs of c.160% in the previous session. This was because banks were able to access the CBN SLF window to fund their deficits at 16.00%. The SLF (CBN Lending Window) consequently hit a 6-month high of N239bn, with net system liquidity estimated at c.N80bn short. We expect rates to remain moderated tomorrow, as there are no significant funding pressures expected.
FX Market
The Interbank rate remained stable at its previous rate of N305.80/$. The NAFEX closing rate depreciated further by 0.01% to a new YTD high of N361.61/$. Rates in the Unofficial market also depreciated further by 0.11% to N362.00/$.
Eurobonds:
We witnessed some pullback in yields in the NGERIA Sovereigns with yields rising by c.7bps, as EM investors remained cautious of the continued strengthening of the US Dollar which is currently at its 2018 peak, supported by a continued rise in USTs, with the 10yr at its highest since 2011 at 3.08%. We witnessed the most sell on the 2032s and 2038s which lost about –0.70pt on average.
The NGERIA Corps were actively traded in today’s session, with most trades witnessed on the longer dated tickers; the SEPLLN 23s, UBANL 22s and FIDBAN 22s. The highest gainers were however at the middle of the curve; the Access 21s, and the FBNNL 20s which gained +0.45pt and +0.20pt respectively. The highest loser was the UBANL 22s which declined by –0.20pt.
