Anchoria Fixed Income Monitor: Naira Defies Liquidity Boost, Depreciates Further Against Dollar


Monday November 23, 2020 / 11:23 AM / by Anchoria AM Research / Header Image Credit: Nairametrics

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Money Market

The market experienced a slight constraint in system liquidity at the tail end of the week as the average money market rate closed at 3.83% from 0.57% the previous week. Consequently, the Open Buy Back (OBB) closed at 3.33% from 0.50% the previous week while Overnight rate (OVN) closed at 4.33%.


We expect relative buoyancy in the system liquidity during the week barring any liquidity mop-up by the Central Bank.

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Forex: USD/NGN

Last week, the Naira was under pressure for most part of the week despite continuous intervention by the Central Bank. The Naira depreciated against the dollar by 2.56% to close at N480/$1 at the parallel market. This may be attributable to the increase in demand met with low supply of dollar. At the Investors and Exporters (I&E) window, Naira closed at $385.83/$ while the CBN official rate retained position at N378.00/$.


The exchange rate is still being affected by dwindling oil prices, scarcity of dollar, increased demand by manufacturers and foreign investors, and absence of foreign capital into the Country.


We expect the pressure on Naira to drop in the short term as the Central Bank continues to carry out measures aimed to stabilize and unify the exchange rate.

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The secondary sovereign Bond market closed bullish last week as the average yield fell by 11bps to close at 4.01% compared to 4.12% in the previous week. The highest yield decline was seen in the APR-2029 which contracted by 40bps to close at 4.20% while the highest yield increase was witnessed in the JAN-2022 bond which rose by 53bps to close at 1.53% compared to 1.00% the previous week.


The sovereign Eurobond market closed bullish as the yields fell by 16bps to close at 6.08% compared to 6.24% the previous week. In the same vein, the corporate Eurobond market closed bullish as the yields fell by 30bps to close at 6.48% compared to 6.78% the previous week. This may be attributable to the news of Moderna's vaccine and the success of its trials. This boosted the demand for risk assets and increased participation in Nigeria's Eurobond market.


We expect activities in the bond market to be based on investors reaction to events around the global oil price and the pandemic.

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Treasury Bills

The Treasury bills market was relatively quiet throughout the week as the average yield closed at 0.11% which is the same as the previous week. In contrast, the average yield on OMO bills fell by 7bps to close at 0.13% compared to 0.20% the previous week.


We expect decreased demand for T-bills considering the rock bottom yields.


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Brent oil rose by 5.75% to close at $45.24 per barrel compared to $42.78 per barrel the previous week. Similarly, WTI closed at $42.15 compared to $40.13 per barrel the previous week.


The surges in oil prices may be attributable to the announcement of Moderna's vaccine which outweighed Pfizer's and BioNTech's in efficacy at 95%. Another reason may be to the positive news from China stating that its crude oil refinery outputs increased by 2.6% year-on-year in October, setting a new refinery run record of 14.09m barrels per day.

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