Investors Rally Nigerian Eurobonds as Oil Prices Push Higher
KEY INDICATORS
| Indicator | Value | Commentary |
| Inflation | 11.28% | As at December 14, 2018. A c.2bps increase from 11.26% recorded in October 2018 |
| MPR | 14.00% | Left Unchanged for the 12th Consecutive Time at the Nov. 22, 2018 MPC Meeting |
| External Reserves | $43.06bn | As at January 3, 2018. A c.0.05% decrease from $43.08bn on January 2, 2018 |
| Brent Crude | $57.06pb | As at January 4, 2019. A c.2.87% increase from $55.47pb on January 3, 2018 |
Bonds
Having retraced sharply by c.18bps in the first trading session of the year, yields in the bond market moderated in the last two days of the week, declining by c.8bps on Friday amid renewed interests by clients mostly on the long end of the curve which compressed by c.20bps on the day. The spike in the yield curve consequently moderated to c.12bps (15.42%) from their closing levels of c.15.30% in the previous year.
We expect the market to remain well bid in the near term, due to the shortage of supply of bonds owing to the scanty issuance at the last auction. We have also witnessed increased demand for higher yielding Non-FGN Bonds, and we expect this to persist in the near term, as we await more clarity from issuance of the Q1 FGN Bond Calendar by the DMO.
| Benchmark FGN Bonds | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 15.54 13-Feb-20 | 15.24 | 14.63 | 0.00 |
| 14.50 15-Jul-21 | 15.58 | 15.26 | (0.15) |
| 16.39 27-Jan-22 | 15.12 | 14.71 | 0.00 |
| 14.20 14-Mar-24 | 15.12 | 14.75 | (0.05) |
| 12.50 22-Jan-26 | 15.66 | 15.34 | (0.02) |
| 16.29 17-Mar-27 | 15.55 | 15.33 | (0.04) |
| 13.98 23-Feb-28 | 15.61 | 15.41 | (0.08) |
| 12.15 18-Jul-34 | 15.40 | 15.22 | (0.24) |
| 12.40 18-Mar-36 | 15.50 | 15.22 | (0.19) |
| 16.2499 18-Apr-37 | 15.37 | 15.17 | (0.12) |
Source: Zedcrest Dealing Desk
Treasury Bills
The T-bills market remained slightly bearish with yields rising higher by c.5bps, as system liquidity was significantly compressed by debits for the Retail FX intervention by the CBN. We witnessed continued selloffs on the shorter tenured maturities while yields moderated marginally by c.5bps on the longer end of the curve, in the absence of an OMO auction by the CBN.
We expect yields to remain pressured in the coming week, as the CBN is expected to maintain its spate of OMO and FX interventions in the market.
| Treasury Bills | |||
| Description | Bid (%) | Offer (%) | Day Change (%) |
| 14-Feb-19 | 15.75 | 14.60 | 0.25 |
| 14-Mar-19 | 15.00 | 14.00 | 0.00 |
| 4-Apr-19 | 12.35 | 12.00 | (0.15) |
| 2-May-19 | 14.00 | 13.25 | 1.00 |
| 13-Jun-19 | 13.60 | 13.40 | 0.10 |
| 18-Jul-19 | 13.60 | 13.50 | (0.40) |
| 1-Aug-19 | 14.50 | 13.60 | 0.00 |
| 12-Sep-19 | 15.00 | 14.65 | 0.00 |
| 3-Oct-19 | 14.90 | 14.75 | (0.10) |
| 14-Nov-19 | 14.85 | 14.75 | (0.05) |
| 5-Dec-19 | 15.00 | 14.90 | (0.05) |
Money Market
Rates in the money market rose by c.7pct, with the OBB and OVN rates closing the week at 20.00% and 23.75% respectively. This came on the back of debits for the Retail FX intervention by the CBN which is estimated to have mopped up c.N250bn from system liquidity which opened the day at c.N265bn positive.
We expect rates to remain elevated opening the week, as the CBN is expected to resume its OMO and wholesale FX interventions.
| Money Market Rates | ||
| Current (%) | Previous (%) | |
| Open Buy Back (OBB) | 20.00 | 14.08 |
| Overnight (O/N) | 23.75 | 14.92 |
Source: FMDQ, Zedcrest Research
