High Investors' Appetite and Improved Liquidity in the Market

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Monday, December 14, 2020 11:35 AM / By Anochoria AM Research / Header Image Credit: Varchev


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Money Market

In the money market space, overnight (OVN) rate contracted by 337bps w/w from 4.25% to 0.88% while the Open Buy Back (OBB) closed the week at 0.50%. A causal effect from inflows due to OMO maturities (N280.09 billion) which outweighed outflows from the CBN's weekly OMO (N70.00 billion) as well as FX auctions.

 

Barring any liquidity shock, we expect rates to remain low as inflows from OMO maturities (N337.64 billion) is expected to boost the system liquidity.

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Forex: USD/NGN

Nigeria's FX reserve shrank further, declining by $197.84 million w/w to $35.01 billion, as the outflows for the CBN's weekly intervention across the various fx windows continue to weigh heavily on the reserves. At the Investors & Exporters (I&E) window, the Naira depreciated further as it weakened by 0.25% to close at N394.00/$ compared to N395.00/$ the previous week.

 

In the parallel market, Naira remained flat at N475.00/$ while the CBN official rate retained its position at N379/$.

 

Expectations remain positive for the naira as the Central Bank continues to carry out measures aimed to stabilize and unify the exchange rate.

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Bond:FGN

Last week, activities were low in the bond market as demand thinned out. Consequently, the average yield expanded by 65bps to close at 4.74% compared to 4.09% in the previous week. The highest yield decline was seen in the APR-2037 which contracted by 98bps to close at 5.34% while the highest yield increase was witnessed in the MAR-2036 bond which rose by 234bps to close at 7.28% compared to 4.94% the previous week. The bearish sentiment may be attributable to decline in daily demand due to low yields available or positioning for auctions as yields closed higher in the Treasuries this week.

 

The sovereign Eurobond market closed bearish as the yields rose by 4bps to close at 5.56% compared to 5.52% the previous week. Conversely, the corporate Eurobond market closed bullish as the yields fell by 5bps to close at 5.81% compared to 5.87% the previous week.

 

We expect investors to continue to react to events surrounding the global oil price and the pandemic.


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Treasury Bills

The Treasury bills market was bearish last week as investors anticipated the issuance of the CBN's Special Bills. As a result, the average yield across all instruments expanded by 28bps to 0.4%. On Wednesday, the CBN offered bills worth N50.93 billion with allotments of N4.41 billion for the 91-day, N7.82 billion - 182 day and N38.70 billion - 364 day - at respective stop rates of 0.01% (previously 0.02%), 0.60% (previously 0.09%), and 3.20% (previously 0.15%). The CBN on Thursday issued 81-day Special Bills in the form of FGN promissory notes worth c. N4.0trillion (of excess CRR) to local banks. The CBN issued the bills at a discount rate of 0.5%

 

We expect decreased demand for T-bills considering the rock bottom yields.

 

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Commodities

Oil prices edged lower on Friday but remained in a positive territory, as the rollout of novel coronavirus vaccine programs fed hopes that demand for fuel would rebound next year.

 

Brent oil closed at $49.96 per barrel compared to $49.25 per barrel the previous week. Similarly, WTI rose by 0.67% to close at $46.57 per barrel. During the week, Brent Oil rose above $50 per barrel for the first time since the oil price slumped in early March, as hopes for a faster demand recovery after the release of COVID-19 vaccines supported a huge rise in U.S crude inventories. The American Petroleum Institute (API) reported a build in crude oil inventories of 1.141 million barrels for the week ended December 4.

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


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