Anchoria Fixed Income Monitor: Naira Strengthens as CBN Continues Forex Sales

Proshare

Monday, October 12, 2020 / 2:51 PM / by Anchoria AM Research / Header Image Credit: Standard Daily Times

 

Proshare Nigeria Pvt. Ltd.


Money Market

The average money market rate rose by 3.15% to settle at 4.44% from 1.29% in the previous week. The Open Buy Back (OBB) rate closed at 4.00% compared to 1.00% the previous week while Overnight rate (OVN) closed at 4.88% compared to 1.58% in the previous week. This may be attributed to outflows from CRR debits (N462.7 billion), FX retail and OMO auctions which outweighed inflows from OMO maturities worth N567.69 billion.

 

We expect buoyancy in the system liquidity as inflows from OMO maturities (N370.00 billion) is expected to hit the system during the week.


Proshare Nigeria Pvt. Ltd.


Forex: USD/NGN

Nigeria's currency strengthened by 1.72% week-on-week as the Naira sold for N457/$ compared to N465/$ the previous week. Naira appreciation may be attributed to improved liquidity as the Central Bank is solely committed to its weekly forex sales. At the Investors & Exporters (I&E) window, Naira closed at N385.83 per dollar compared to N385.80 per dollar the previous week.

 

In the recently published Monetary Credit, Foreign Trade and Exchange Guidelines for the Fiscal Year 2020-2021, the CBN estimates that the FX reserves would decline to between $29.9 billion and $34.3 billion by the end of December 2020. In 2020, the FX reserves have been negatively impacted due to lower oil receipts and intensifying capital outflows among Foreign Portfolio Investors (FPIs).

 

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.


Proshare Nigeria Pvt. Ltd.

 

Bond: FGN

The secondary sovereign Bond market closed bullish last week as the average yield fell by 58bps to close at 6.25% compared to 6.83% in the previous week. Yields contracted across all instruments except the JAN-2022 bond. The highest yield decline was seen in the FEB-2028 which contracted by 149bps to close at 5.76% compared to 7.25% the previous week.

 

The sovereign Eurobond market closed bullish as the yields fell by 84bps to close at 6.66% compared to 7.50% the previous week. In the same vein, the corporate Eurobond market closed bullish as the yields fell by 15bps to close at 6.74% compared to 6.89% the previous week.

              

We expect to see sustained demand in the Bond market as investors continue to re-invest their maturities while retaining a cautionary approach in the market.

 

Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.


Treasury Bills

The Treasury bills market closed bearish last week as the average yield fell by 48bps to close at 1.44% compared to 1.89% the previous week. In the same vein, average yield on OMO bills fell by 58bps to close at 6.25% compared to 6.83% the previous week.

 

We expect increased demand in the T-bills market as investors take position in the market.

 

Proshare Nigeria Pvt. Ltd.

 

Commodities

Crude oil prices closed on a positive note as Brent oil closed at $42.85 per barrel compared $39.27 per barrel. In the same vein, WTI closed at $40.60 per barrel compared to $37.05 the previous week.

 

According to Reuters, prices were supported by strike action in Norway that shut down six offshore oil and gas fields. More oil and gas field shutdowns are possible in Norway as the strike continues to escalate over pay.

 

Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Related News

  1. Onyema, Oniha Highlight Investment Opportunities in the Fixed Income Market
  2. Anchoria Fixed Income Monitor: Naira Strengthens Against Dollar after Holiday
  3. October 2020 FGN Savings Bonds Offer for Subscription
  4. Treasury Bill Auction Holds Wednesday September 30th, 2020
  5. FMDQ Clear Landmarks as Nigeria's Premier CCP
  6. Anchoria Fixed Income Monitor: Increased Investors Appetite at Bond Auction
  7. Average NT-Bills Yield Advances by 3bps to 1.7%; PMA Holds this Wednesday
  8. DMO Moving Steadily to Its Funding Target
  9. CBN Cuts OMO Rates by 12bps Keeping Up The Theme Of The Week
  10. Fixed Income Quarterly Q3 2020: Local Market, Local Players
  11. DMO Cuts FGN Bond Auction Rates by 84 Basis Points As MPR Cut Still Shakes Fixed Income Markets

Proshare Nigeria Pvt. Ltd.
READ MORE:
Related News
SCROLL TO TOP