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
MPR 14.00%
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
Description Bid (%) Offer (%) Day Change (%)
16.00 29-Jun-19 16.48 16.41 0.03
15.54 13-Feb-20 16.36 16.29 (0.02)
14.50 15-Jul-21 16.30 16.23 (0.08)
16.39 27-Jan-22 16.16 16.09 (0.02)
14.20 14-Mar-24 15.90 15.83 (0.04)
12.50 22-Jan-26 16.05 15.98 (0.09)
12.50 22-Jan-27 16.17 16.10 (0.10)
12.15 18-Jul-34 15.95 15.88 (0.03)
12.40 18-Mar-36 15.99 15.92 (0.03)
FGN Treasury Bills
Description Bid (%) Offer (%) Day Change (%)
3-Aug-17 18.40 18.15 0.00
14-Sep-17 15.50 15.25 1.41
5-Oct-17 18.65 18.40 (0.35)
2-Nov-17 18.80 18.55 (0.05)
4-Jan-18 18.50 18.25 (0.10)
1-Feb-18 18.55 18.30 (0.10)
1-Mar-18 18.50 18.25 0.00
5-Apr-18 18.35 18.10 (0.20)
3-May-18 18.50 18.25 0.05
Eurobonds
Issuer Description Yield (%) Day Change (%)
FGN 6.38 12-Jul-23 5.73 0.00
FGN 7.875 16-Feb-32 6.95 0.00
Fidelity Bank 6.88 09-May-18 12.91 0.33
GT Bank 6.00 08-Nov-18 4.39 0.07
Zenith Bank 6.25 22-Apr-19 5.45 0.07
First Bank 8.25 07-Aug-20 10.64 (0.01)
Access Bank 7.677 24-Jun-21 9.41 0.04
Money Market Rates
Current (%) Previous (%)
Open Buy Back (OBB) 15.17 6.33
Overnight (O/N) 15.67 6.75
FX Market
Current (N/$) Previous ( N/$)
Interbank 305.75 305.25
CBN SMIS 320.00 320.00
I&E FX Window 365.29 365.07
Parallel Market 365.50 365.00
            Primary Market Auction  Results
NTB – 14 June 2017
Tenor Rate (%) Offer (N’Bn) Sub (N’Bn) Sale (N’Bn)
91 days 13.50 39.06 39.20 39.06
182 days 17.30 23.02 24.79 23.02
364 days 18.69 174.64 201.20 174.64
FGN Bond Offer– 21 June 2017
Tenor Rate (%) Offer (N’Bn) Sub (N’Bn) Sale (N’Bn)
Jun-21 TBD 40.00 N/A N/A
Mar-27 TBD 50.00 N/A N/A
Apr-37 TBD 50.00 N/A N/A
OMO – 16 June 2017
Tenor Rate (%) Offer (N’Bn) Sub (N’Bn) Sale (N’Bn)
184 day 18.00 5.00 1.05 1.05
352 day 18.60 10.00 85.79 85.79

Sources: FMDQ, CBN, Bloomberg, Zedcrest research

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