DAILY MARKET REPORT: FIXED INCOME, MONEY MARKET AND FX – JUNE 16 2017

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In its latest move to further rein inflation, the Central Bank of Nigeria (CBN) mopped up a total of N200.32 billion from the Nigerian banking system through a special Open Market Operation (OMO) announced on Thursday at the rate of 16 percent per an- num. It also conducted another OMO today with a total sale of about N87bn at 18.00 – 18.60 percent as shown in our report.

ECONOMIC INDICATORS
Inflation (YoY)16.25%
Exchange Rate ($)N305.75
MPR14.00%
Foreign Reserves$30.21Bn
Brent Crude$47.24

The Fixed Income market opened today with the bulls dominating the early trades. The CBN had stated its intention to issue stabilization securi- ties (T-bills) of 182days tenor at 16.00% to manage excess liquidity in the system. This news supported a bullish trend as market playes went on a buying spree as it seemed the high interest rate era was coming to an end. However, upon the announcement of OMO results with the CBN maintaining stop rates at 18.00% and 18.60%, we saw a sharp reversal in market mood with aggressive sell-off across the entire Fixed income spec- trum. Yields trended down by an average of 40bps on T-bills and 8bps on bonds. We anticipate a mixed trading session next week as market play- ers try to weigh in the interest rate intent of the apex bank.
The aggregate sale of N286billion in OMO T-bills by the CBN resulted in a sharp increase in interest rates today. OBB and O/N rates closed at 15.00% levels, coming from 6.00%. The CBN has continued to adopt differ- ent strategies to manage excess liquidity in the system to consolidate on the gains of a stable exchange rate and slowdown in inflationary pres- sures. We expect interest rates to trend northwards next week as CBN continues its FX interventions and OMO auctions.

FGN Bonds
DescriptionBid (%)Offer (%)Day Change (%)
16.00 29-Jun-1916.4816.410.03
15.54 13-Feb-2016.3616.29(0.02)
14.50 15-Jul-2116.3016.23(0.08)
16.39 27-Jan-2216.1616.09(0.02)
14.20 14-Mar-2415.9015.83(0.04)
12.50 22-Jan-2616.0515.98(0.09)
12.50 22-Jan-2716.1716.10(0.10)
12.15 18-Jul-3415.9515.88(0.03)
12.40 18-Mar-3615.9915.92(0.03)
FGN Treasury Bills
DescriptionBid (%)Offer (%)Day Change (%)
3-Aug-1718.4018.150.00
14-Sep-1715.5015.251.41
5-Oct-1718.6518.40(0.35)
2-Nov-1718.8018.55(0.05)
4-Jan-1818.5018.25(0.10)
1-Feb-1818.5518.30(0.10)
1-Mar-1818.5018.250.00
5-Apr-1818.3518.10(0.20)
3-May-1818.5018.250.05
Eurobonds
IssuerDescriptionYield (%)Day Change (%)
FGN6.38 12-Jul-235.730.00
FGN7.875 16-Feb-326.950.00
Fidelity Bank6.88 09-May-1812.910.33
GT Bank6.00 08-Nov-184.390.07
Zenith Bank6.25 22-Apr-195.450.07
First Bank8.25 07-Aug-2010.64(0.01)
Access Bank7.677 24-Jun-219.410.04
Money Market Rates
Current (%)Previous (%)
Open Buy Back (OBB)15.176.33
Overnight (O/N)15.676.75
FX Market
Current (N/$)Previous ( N/$)
Interbank305.75305.25
CBN SMIS320.00320.00
I&E FX Window365.29365.07
Parallel Market365.50365.00
            Primary Market Auction  Results
NTB – 14 June 2017
TenorRate (%)Offer (N’Bn)Sub (N’Bn)Sale (N’Bn)
91 days13.5039.0639.2039.06
182 days17.3023.0224.7923.02
364 days18.69174.64201.20174.64
FGN Bond Offer– 21 June 2017
TenorRate (%)Offer (N’Bn)Sub (N’Bn)Sale (N’Bn)
Jun-21TBD40.00N/AN/A
Mar-27TBD50.00N/AN/A
Apr-37TBD50.00N/AN/A
OMO – 16 June 2017
TenorRate (%)Offer (N’Bn)Sub (N’Bn)Sale (N’Bn)
184 day18.005.001.051.05
352 day18.6010.0085.7985.79

Sources: FMDQ, CBN, Bloomberg, Zedcrest research