Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Tuesday, October 02, 2018 / 01:08 PM / Anchoria AM Research
Money Market
The money market rate increased last week as the
Overnight rate (OVN) and Open Buy Back (OBB) rose to 7.17% and 6.00%
respectively. Consequently, the average money market rate rose by 2.21% to
settle at 6.59% despite an increase in system liquidity to close at cN580bn as
a result of inflow of cN260bn from OMO T-bill maturities, FAAC fund of cN300bn
and CBN retail FX refund of cN204bn in spite of an outflow in respect of
reversal of Paris Club payments made to states by the FG, Bond Sales of
cN96.74bn and Wholesale, Invisibles and SME FX auction of $210mn.
We expect rates to inch up on Monday as banks are
expected to fund for another round of FX sales in the Wholesale, Invisibles and
SME Market. Barring significant inflow and anticipated OMO during the week, the
rate is expected to close the week higher.
Instrument |
21/09/2018 |
28/09/2018 |
Change |
OBB |
4.00% |
6.00% |
+2.00% |
OVN |
4.75% |
7.17% |
+2.42% |
Forex: USD/NGN
The CBN Official rate and the rate in the Investors
and Exporters’ FX Window continued on its upward trend to close at N306.35/$
and N363.92/$ with 0.02% and 0.07% increase respectively. Naira at the parallel
market remained unchanged to close at N361.00/$ (using the Everdon BDC Rate).
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.
21/09/2018 |
28/09/2018 |
Change |
|
CBN Official Rate |
306.30 |
306.35 |
+0.02% |
I&E FX Window |
363.68 |
363.92 |
+0.07% |
Everdon Rate |
361.00 |
361.00 |
+0.00% |
Source: Anchoria AM Research, FMDQ OTC
Commodities
The Brent Crude oil and WTI crude oil rose by 4.97% and 3.49% to close at $82.72 per barrel and $73.25 per barrel respectively following the decision of OPEC not to increase their oil production and as US reiterated its sanctions on Iran during the UN meeting.
Also, US Energy Secretary ruled out
tapping the Strategic Petroleum Reserve, compounding concerns that sanctions on
Iran will tighten the markets.
Fixed Income
Bond
The Bond market traded on a bullish note last week with yields falling across all maturities traded. This is against the backdrop of increased buying interest from local participants (Pension Fund Administrators and Asset Managers). The FEB 2028 and JUL 2034 bonds were the most traded bonds during the week with N49.82bn and N40.45bn value traded respectively. Average yield fell by 15bps to close the week at 14.91%.
During the week, the following activities shaped
investors sentiments: a) increased in spot rate at the Bond Auction b) Increase
in Federal Reserve rate c) Maintain status quo for the Monetary Policy Rate
(MPR).
September Bond Auction Result
Secondary Market
Source: Anchoria AM Research, FMDQ OTC
Treasury Bills
Due to decreased system liquidity at the earlier part
of the week, the treasury bills market traded on a bearish note. Consequently,
the average yield rose significantly by 42bps to close the week at 13.19%.
Market activities were relatively quiet as value of transactions rose to
N1.08trillion from N1.51trillion in the previous week.
Secondary Market
Source: Anchoria AM Research, FMDQ
OTC
Related News
1.
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2.
Bond Yields Compress, as Investors Rally the Long End
3.
September 2018 FGN Bond Auction Oversubscribed
4.
DMO Gets Robust Auction Demand, Raises More than the
N90bn Offered at 1.64X Bid to Cover
5.
Funding Rates Spike As CBN Reverses Paris Club Credits
6.
Bond Market OpensFlat, as Market Players Await Auction
7.
Buying Interest Pressures Rates Lower as Average Rate
Declines 1.6% WoW
8.
Overnight Rate Falls to 4.75% as Money Market Rate
Decrease Last Week
9.
Bond Yields Compress Further on Renewed Local Demand