Gold Jumps Past $1,700 Level as Coronavirus Fears Spur Haven Demand

Monday, July 13, 2020 / 5:40 PM / By Anchoria AM Research / Header Image Credit: FX Empire

Money Market

The interbank market was highly illiquid for most part of the week due to lack of inflow until Thursday when the system witnessed some inflow such as CRR refund worth N300.00 billion, FX Swap maturities and OMO maturities worth N92.52 billion.

Subsequently, the average money market rate fell significantly by 8.55% to settle at 13.95% from 22.50% in the previous week. Open Buy Back (OBB) closed at 13.80% compared to 21.50% in the previous week while Overnight rate (OVN) closed at 14.10% compared to 23.50% the previous week.

We expect the inflow from OMO maturities (N16.00 billion) and FGN Bond coupon payments (N40.68 million) to boost the system liquidity this week.

Forex: USD/NGN

With the current unification drive of the CBN following the IMF requirement for disbursement of loan, the CBN adjusted the official rate to N381/$ from N361/$. Following this and coupled with Forex scarcity, naira at the I & E Fx window depreciated by 26bps to close the week at N387/$, at the parallel market the cash rate depreciated by 2.17% to close at N470/$.

We expect a continuous dwindling in the FX liquidity across all FX windows this week.

Bond: FGN

The secondary sovereign Bond market closed bullish last week as the average yield fell by 16bps to close at 7.95% compared to 8.11% in the previous week. The highest yield decline was witnessed in the APR-2023 bond which declined by 136bps to close at 4.11% compared to 5.46% the previous week while the highest yield increase was seen in the FEB-2028 bond which closed at 8.37%.

The Sovereign Eurobond market closed on a bearish note as the average yield rose by 29bps to close at 7.68% compared to 7.39% the previous week due to uncertainty around the second wave of the corona virus. The Corporate Eurobond market closed bullish as the average yield fell by 6bps to close at 7.91% compared to 7.97% the previous week.

We expect the bond market to be upbeat this week due to anticipated increase in system liquidity and optimism in the crude oil market.

Treasury Bills

The Treasury bills market closed bearish last week as the average yield rose by 2bps to close at 2.11% compared to 2.09% the previous week. In the same vein, OMO bills rose by 49bps to close at 5.65% compared to 5.15% the previous week.

We expect investors to take position in the Treasury bills auction expected during the week.

Commodities

Despite the rising cases of the pandemic and the uncertainty around the global economy, Gold futures rises to $1800 for the first time in nine years. The commodity, widely favored by investors as a store of value in times of stress has been one of the best performing asset classes of 2020 as investors have looked for safe places to park their cash at a time of heightened uncertainty for the global economy due to the Covid-19 crisis.

Brent Oil rose by 1.03% to close at $43.24 per barrel while WTI fell by 0.25% to close at $40.55 compared to N40.56 per barrel the previous week.

Related News

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3. Sigh of Relief as CRR Refund and SWAP Maturities Inflows Boost Interbank System Liquidity
4. Money Market Rates Remain Stressed As Local Banks Queue Up For Liquidity From The CBN
5. OMO Bears Emerge As Annual AMCON Charge Further Squeezes System Liquidity
6. System Liquidity Crashes Into Negative Territory, Freezing Trading Activities In the FI Space
7. CBN Adjusts Naira Value to N380 per Dollar at the Secondary Market Interventions Sale
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