| Bonds & Fixed Income |    422 VIEWS  |
| Bonds & Fixed Income | |
| 422 VIEWS | |
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| PROSHARE | |
| PROSHARE | |
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.
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