Anchoria Fixed Income Monitor: An Activities Filled Week With T-Bills, OMO and Bond Auction

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Monday, June 22, 2020 / 01:48 PM / by Anchoria AM Research / Header Image Credit: Warrior Trading

 

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Money Market

The average money market rate rose significantly last week by 6.59% to settle at 15.92% from 9.33% in the previous week. This is attributable to outflows from CRR debit (N216.00 billion), OMO auction (N80.00 billion), FGN Bond auction (N100.00 billion) and Sukuk bond (N162.58 billion).

Notable inflows included: OMO maturities - N337.94 billion and retail FX refunds - N337.94 billion.

The Open Buy back rose by 6.34% to close at 15.17% while the Overnight rate rose by 6.84% to close at 16.67%.

We expect the system liquidity to remain down in the absence of inflow during the week.

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Forex: USD/NGN

The Naira depreciated marginally by 19bps during the week from N385.75/$ to N386.50/$ in the previous week, this is due to low inflow witnessed at the I&E Fx window estimated at c$150 million. At the parallel market, the narrative was the same as the Naira depreciated by 0.13% from N450/$ to N456/$, while the official rate remained unchanged at N361/$.

We expect similar trend to continue as the hope for international flight became slimmer due to the postponement of domestic flight by Federal Government during the week.

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Bond: FGN

The secondary sovereign Bond market closed bullish last week as the average yield fell by 72bps to close at 9.36% compared to 10.08% in the previous week. Yields declined across all instrument with the highest yield decline witnessed in the APR 2029 bond which fell by 135bps to close at 9.61% compared to 10.96% the previous week.

At the auction held last week, the DMO offered a total of N150 billion across all instruments through re-openings. Successful bids for the 12.75% FGN APR 2023, 12.50% FGN MAR 2035, and 12.98% FGN MAR 2050 were allotted at the marginal rates of 8.00%, 11.00% and 12.15%, respectively. However, the original coupon rates of 12.7500% for the 12.75% FGN APR 2023, 12.50% for the 12.50% FGN MAR 2035 and 12.98% for the 12.98% FGN MAR 2050 were maintained. (See next page for Bond Auction result).

We expect more renewed interest this week as investors continue to take positions in the bond market.


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Treasury Bills

The Treasury bills market closed bullish last week as the average yield fell by 122bps to close at 2.17% compared to 3.39% the previous week. Conversely, OMO bills fell by 16bps to close at 4.85% compared to 5.01% the previous week.

At the NTB auction held during the week, the CBN offered a total of N14.61 billion worth of bills to investors. The auction was oversubscribed across all tenors as demand outweighed supply. The auction closed with the CBN rolling over N2.00 billion for the 91 day, N2.00 billion for 182 days and N10.61 billion for 364 day bills with stop rates at 1.80%, 2.04% and 3.75% respectively.

 

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Commodities

Oil prices have shrugged off concerns of a second wave of the coronavirus, with WTI hitting $39.75 per barrel last week. Brent Oil rose by 8.93% to close at $42.19 per barrel.

The rebound in oil prices is aided by OPEC's agreement to substantially curb oil output by cutting down oil production and extending the cuts. The rising demand for Brent crude was led by China, followed by Europe and North America.

The new oil stability around $40, which is above the sustainability committee's benchmark, will help oil-dependent nations like Nigeria heave a sigh of relief.

 

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