Fixed Income Monitor - A Positive Sentiment Returns In The Market

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Monday, September 02, 2019   /12:10PM  / Anchoria AM Research / Header Image Credit: FMDQ Academy

 

Money Market

The average money market rate dropped by 8.36% to settle at 9.90% from 18.25% in the previous week due to a significant improvement in system liquidity occasioned by huge OMO maturities during the week. The system liquidity is estimated to have closed the week at a cN755 billion from negative figure of c$360 billion in the previous week.

 

The Open Buy Back (OBB) and Overnight rate (O/N) fell to 9.29% and 10.50% from 17.71% and 18.79% respectively in the previous week. Major inflow for the week included: OMO Maturity of cN388bn, CBN Retail refund of N210bn and Coupon Payment of cN35bn while major outflow included Weekly Wholesale, Invisible and SME FX auction of $210mn, OMO sale of cN48bn

With the anticipated OMO sales and FX intervention by the CBN, we expect the rate to inch up slightly this week.

Instrument

23/08/2019

30/08/2019

Change

OBB

17.71%

9.29%

-8.42%

OVN

18.79%

10.50%

-8.29%

Source: Anchoria AM Research, FMDQ OTC

 

Forex: USD/NGN

The foreign exchange market remained relatively stable last week as the CBN Official Rate rose marginally by 2bps to close at N307.00/$ while the rate at I&E FX window fell marginally by 0.06% to close at N362.93/$. The rate in the parallel market remained unchanged at N360.00/$.

It must be asserted that there is a downward movement in the foreign reserve due to the continuous FX intervention by CBN. The foreign reserve closed at $43.7bn, a 76bps reduction during the week.


We expect rates in the parallel market to remain constant as the apex bank continues to supply FX into the market, coupled with its frequent Wholesale and Retail SMIS programme.

23/08/2019

30/08/2019

Change

CBN Official Rate

306.95

307.00

+0.02%

I&E FX Window

363.14

362.93

-0.06%

Everdon BDC Rate

360.00

360.00

+0.00%

 

Commodities

Oil price strengthens last week due to dramatic drop in U.S. crude oil inventory and renewed optimism over U.S.-China trade relations.  Investors are expected to remained cautious due to demand fears caused by Hurricane Dorian in Florida.


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Meanwhile, it was recorded that Nigeria lost 22 million barrels of oil to theft in the first half of this.

 

Fixed Income

Bond: FGN

The secondary sovereign Bond Market closed on a bullish note last week with the average yield up 25bps to close at 14.13% from 14.39% in the previous week. The narrative remained unchanged for the FGN Eurobond market as the average Eurobond yield fell by 9bps to close at 6.56% from 6.65% in the previous week.

The renewed demand sentiment can be attributable to:

a)     Buoyant liquidity seen during the week.

b)     Renewed optimism over U.S.-China trade relations

c)      Increased Crude oil price

 

Secondary Market

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Source: Anchoria AM Research, FMDQ OTC

 

Treasury Bills

Due to buoyant system liquidity, the treasury bill (secondary market) closed on a bullish note. The average T-bills yield fell from 15.15% to 13.84% in the previous week.

The Primary Market Auction for T-bills held on Wednesday, 28th August 2019 saw a subscription rate of 166.72% with average spot rate across tenor inched up by 84bps from 11.02% to 11.86%. 91 days closed at 11.10% (previously 9.70%); 182 days closed at 11.59% (previously 11.35%); 364 days closed at 12.89% (previously 12.00%).


Secondary Market

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Anchoria Research: +234 908 720 6076;  research@anchoriaam.com


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Related News

1.       September 2019 FGN Savings Bonds Offer for Subscription

2.      Bond Yields Trend Higher as CBN Floats Further OMO Auction

3.      NTB Auction Oversubscribed by 67%, as Stop Rates Clear 80bps Higher

4.      Treasury Bill Auction Schedule For August 28th, 2019

5.      Average Money Market Rate Dropped Marginally By 0.53% To Settle At 18.25% From 18.79%

6.      Bearish Momentum Sustained as Average T-Bills Yield Advanced 130bps to 15.2%

7.      Total Subscription For August 2019 FGN Bond Auction Put At N64.71bn

8.     Escalating Trade Tensions to Weigh on Domestic Fixed Income Yields

9.      Summary of FGN Bond Auction Results For August 2019

10.  DMO Records Lowest FGN Bond Auction Sale in 8-Months

11.   Funding Pressures Persist as Banks camp at the Standing Lending Facility (SLF) Window


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