Anchoria Fixed Income Monitor: FX Pressure Rebound as CBN Weakened Forward Rate


Monday, May 11, 2020  / 03:15 PM  /By Anchoria AM Research  / Header Image Credit: Advisory HQ

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Money Market

The average money market rate rose marginally last week by 5.38% to settle at 7.88% from 2.50% in the previous week. This is due to resumption of the FX intervention programme by the CBN.


Notable outflows for the week included weekly FX wholesale SMIS of $210mn on Monday and Retail FX intervention on Friday while notable inflow included OMO maturities worth N18.50 billion.


We expect the system to be relatively awash with buoyant system liquidity this week due to the OMO maturities worth N296.95 billion.


Forex: USD/NGN

Based on our expectation, the FX market witnessed reduced pressure last week as the CBN resumed its weekly intervention programme. Naira at the I&E FX window and parallel market strengthened to N387.25/$ and N447.00/$ from N387.80/$ and N450.00/$ respectively in the previous week.


It must be asserted that towards the tail end of the week, we noticed some demand pressure as CBN weakened its forward rate by c15% across all tenors.


Also, during the week the foreign reserve rose by 1.76% to $33.48 billion due to the inflow of $3.4 billion Emergency Loan from IMF and recovery of $331 million Abacha Loot.


Bond: FGN

The secondary sovereign Bond market closed slightly bearish last week as the average yield rose by 3bps to close at 10.22% compared to 10.19% in the previous week. The highest yield increase was witnessed in the MAR-2025 issuance which rose by 135bps to close at 9.36% while the highest yield decline was witnessed in the APR-2029, fell by 45bps to close at 10.83% from 11.28%.


The Sovereign Eurobond market closed on a bullish note as the average yield fell by 173bps to close at 10.40% compared to 12.13% the previous week due to recovery in Crude Oil Price and increase in the country's external reserve while the Corporate Eurobond market closed bearish as the average yield rose by 48bps to close at 13.70% compared to 14.17% the previous week.


We expect continued demand in the Sovereign Eurobond Space as price of crude oil continue to improve and as investors takes advantage of attractive yield


Treasury Bills

The T-bills secondary market closed on a bullish note last week as the average yield fell by 4bps to close at 2.66% compared to 2.70% the previous week. Conversely, OMO bills rose by 17bps to close at 10.08% compared to 9.91% the previous week.


There were no activities (No T-bills and OMO auction) last week however we expect the CBN to roll over N33.8 billion worth of T-bills and float an OMO auction this week.



As projected the crude oil price was on spiral last week for the second consecutive week as investors and traders anticipated more inventories build up and increased demand as many countries relax their lock down in the following months


The Brent rose by 17bps to close at $30.97 per barrel while WTI rose by 25bps to close at $24.74 per barrel.

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