Funding Rates Rise Higher as CBN Intervenes in FX Market


Tuesday, March 27, 2018 /5:00 AM /Zedcrest Capital

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The bond market was scantily traded in today’s session, with very little in the way of flows, mostly driven by few client interests. Yields compressed just marginally by 1bps, with some late market trades observed on the 24s, 36s and 37s.  In absence of any significant client flows, we expect the market trend to be relatively flattish in the near term, as market players remain relatively risk off on bonds, whilst anticipating the policy posture from the upcoming MPC meeting of the CBN, which is still largely expected to be a no event, to be largely substantiated by the recent developments in global markets and monetary policy tightening in developed markets.

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Treasury Bills

The T-bills market was also relatively muted, as buy interests were largely constrained by the squeeze in system liquidity due to the wholesale FX interventions by the CBN. The CBN did not conduct an OMO auction in today’s session, due to the relatively tight funding pressures in the market. With expected inflows from retail FX refunds tomorrow, we expect a resumption in OMO issuance by the CBN, with Average T-bill yields also expected to trend slightly lower from their flatly traded levels in today’s session.


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Money Market

The OBB and OVN rates rose higher by c.20pct to 43.33% and 44.25%, on the back of the squeeze in system liquidity from the FX interventions by the CBN ($210m). System liquidity is currently estimated at c.N85bn positive. We expect rates to crash below 20% tomorrow, due to anticipated inflows from retail FX refunds by the CBN.

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FX Market

The Interbank rate appreciated slightly by 0.02% to N305.65/$ from its previous rate of N305.70/$, as the CBN intervened to the tune of $210m in the wholesale, SME and Invisibles segment of the market. The NAFEX rate fell slightly by 0.02% to N360.06/$, with total volume traded rising slightly by 6.84% to $277m. Rates in the Unofficial market however appreciated by 0.03% to N361.10/$. 


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The NGERIA Sovereigns were slightly bullish, with demand mostly skewed to the long end of the curve. We witnessed the bulk of trades on the 47s (+0.27pt) and the 27s (+.05pt) with the curve closing positive at +0.15pt on average.


The Nigerian banks remained largely bearish, with investors still better sellers of 22s (FIDBAN, UBANL, Zenith) and the Access 21s Snr as well. The SEPLLN 23s was also sold at 99.75, while investors were slightly bullish on the FBNNL 20s.


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Information on all Nigerian bonds is available here

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