| Bonds & Fixed Income |    797 VIEWS  |
| Bonds & Fixed Income | |
| 797 VIEWS | |
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Monday
November 23, 2020 / 11:23 AM / by Anchoria AM Research / Header Image
Credit: Nairametrics
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.
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.
Bond:FGN
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.
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.
Commodities
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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