| Bonds & Fixed Income |    806 VIEWS  |
| Bonds & Fixed Income | |
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Monday, February 24, 2020 /05:13
PM / By Anchoria AM Research / Header Image Credit: Nairametrics
Money Market
The average money market rate rose marginally last
week by 0.54% to settle at 3.42% from 2.88% in the previous week. This is
attributable to the outflows from FGN Bond worth N100.00 billion during the
week.
Notable Inflows includes OMO maturities - N927.75
billion, while Outflows includes - weekly wholesale, invisible & SME FX
auction of $210m and Bond auction of N100.00 billion.
The Open Buy Back (OBB) and Overnight rates (O/N) fell
to 3.00% and 3.83% from 2.50% and 3.25% respectively.
We expect constraint in system liquidity this week due
to the upcoming bond auction which will increase the money market rate.
Forex: USD/NGN
The foreign exchange market was relatively stable last
week as the CBN Official Rate rose by 2 bps to close at N307.00/$ while the
rate at the I&E FX window fell by 14bps to close at N364.26/$.
The Central Bank of Nigeria, CBN has stated that only
cash deposits into domiciliary account can be withdrawn over the counter and
not through electronic transfer. The CBN also added that customers' deposits
made through electronic transfer via domiciliary accounts can only be
transferred but cannot be withdrawn over the counter.
This implies that when a customer deposits foreign
currency in cash or via electronic transfer, such customer can only withdraw
the money from the account in the manner with which the deposits were made into
the domiciliary accounts.
Bond: FGN
The secondary sovereign Bond market closed bullish
last week as the average yield fell by 30bps to close at 9.91% compared to
10.21% the previous week. The JAN-2022 bond increased by 2bps to close at 7.56%
while the APR 2023 & MAR 2025 bond had the highest yield decrease of 103bps
to close at 8.03% and 8.69% respectively.
The Sovereign Eurobond market closed on a bearish note
as the average yield rose by 5bps to close at 5.81% compared to 5.77% the
previous week. The narrative was different for the Corporate Eurobond market as
the average yield fell by 7bps to close at 4.99% compared to 5.06% the previous
week.
At the bond auction held last week, the DMO offered
instruments worth N140 billion to investors via re-openings – 12.75% APR 2023
(Stop rate: 8.75%, Previously: 9.85%), 14.55% APR 2029 (Stop rate: 10.70%,
Previously:11.13%) and 14.80% APR 2049 (Stop rate: 12.15%, Previously: 12.56%).
(See next page for Bond Auction result).
We expect bond traders to retain a cautionary approach
in the market this week.
Treasury Bills
The T-bills secondary market closed on a bullish note
last week as the average yield fell by 7bps to close at 3.59% compared to 3.66%
the previous week. In the same vein, OMO bills depreciated by 123 bps to close
at 11.99% compared to 13.23% the previous week.
According to the highlights from the Banker's
Committee report, the CBN has declared that the Open Market Operations (OMO)
has now become a harmful instrument as against honey that it used to be. Hence,
Banks are encouraged to remove its eyes from OMO and play responsibly. Also, it
is speculated that the CBN is set to reduce the rates on savings account
deposit rate to near 1%.
We expect the continuous yield widening in T-bills
market ahead of the Treasury Bills auction this week.
Commodities
The crude oil price rose by 2.06% to close at $58.50
for the week ended 21st February 2020 compared to $57.32 the previous week.
The NNPC has effectuated an across the board price cut
by 50-60 cents per barrel month-on-month on its March 2020 official crude oil
selling prices. This is due to the Coronavirus epidemic which has restricted
Nigerian Cargoes sailing for China in February, hence being dependent on
European demand.
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