Money Market Rates Crash As FAAC Inflows Bolster Liquidity

Proshare

Sunday, September 22, 2019 / 06:25 PM / By Zedcrest Capital / Header Image Credit: AdvisoryHQ

 

System liquidity opened the trading session tight at c.N40bn positive, causing money market rates to open at 15.00% levels. However, inflows from monthly FAAC disbursements later in the day eased funding pressures. OBB and OVN rates consequently closed the week lower at 6.43% and 7.57% respectively.

 

With funding pressures from Retail & Wholesale FX and FGN Bond auctions expected in the coming week, we anticipate a rise in money market rates to close out the week.

 

Below are highlights from trading activities in the fixed income and forex market on September 20, 2019

 

 

Bonds

The bullish run in the Bond market slowed in today's session, as the Monetary Policy Committee meeting took center stage. Spreads tightened in the market, as yields closed the session lower by c.6bps on the average on the FGN benchmark curve. 

 

We anticipate a slight retracement in yields in the coming week, as market participants price in supply coming from the monthly FGN Bond auction scheduled for Wednesday, September 25, 2019.




Benchmark FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

14.50 15-Jul-21

14.33

13.56

(0.33)

16.39 27-Jan-22

14.29

13.74

0.00

12.75 27-Apr-23

14.54

14.27

0.00

14.20 14-Mar-24

14.04

13.62

(0.14)

13.53 23-Mar-25

14.28

14.04

0.01

12.50 22-Jan-26

14.27

14.02

0.07

16.29 17-Mar-27

14.24

14.14

0.00

13.98 23-Feb-28

14.22

14.08

(0.06)

12.15 18-Jul-34

14.46

14.35

(0.08)

12.40 18-Mar-36

14.49

14.30

(0.05)

16.2499 18-Apr-37

14.46

14.24

(0.04)

14.80 26-Apr-49

14.54

14.44

(0.06)


 


































Source: Zedcrest Dealing Desk 


Treasury Bills

The T-Bills market also trading on a muted note with focus on the MPC meeting outcomes, yields across the benchmark NTBills curve compressed by c.1bp on the average. We noted sustained demand for long-dated securities, especially September 2020 maturities, as participants covered for prorated volumes at the OMO auction held the previous day.

 

With monthly statutory inflows improving system liquidity this week and OMO maturities of c.N422.05bn expected in the coming week, we maintain our cautious outlook for T-bills at current yields as we expect the Central Bank to float multiple OMO auctions to check liquidity levels.

 

Benchmark Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

3-Oct-19

12.85

12.10

0.00

14-Nov-19

12.65

11.20

(0.35)

5-Dec-19

13.00

12.35

0.00

2-Jan-20

13.00

12.50

0.00

6-Feb-20

13.00

12.70

0.00

19-Mar-20

12.30

12.10

(0.20)

2-Apr-20

13.10

12.85

0.15

14-May-20

13.25

12.85

0.05

04-Jun-20

13.45

12.60

0.20

02-Jul-20

13.50

12.50

0.10

13-Aug-20

13.50

13.20

0.00



Source: Zedcrest Dealing Desk


 

Money Market

System liquidity opened the trading session tight at c.N40bn positive, causing money market rates to open at 15.00% levels. However, inflows from monthly FAAC disbursements later in the day eased funding pressures. OBB and OVN rates consequently closed the week lower at 6.43% and 7.57% respectively.

 

With funding pressures from Retail & Wholesale FX and FGN Bond auctions expected in the coming week, we anticipate a rise in money market rates to close out the week.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

6.43

16.86

Overnight (O/N)

7.57

18.07

Source: FMDQ, Zedcrest



FX Market

At the interbank, the Naira/USD spot and SMIS rates remained stable to close at N306.90/$ and N358.02/$ respectively. At the I&E window, the closing rate for the Naira depreciated by 13k to close the trading session at N362.39/$.

At the parallel market, the cash and transfer rates remained stable to close the week at N358.00/$ and N362.50/$.


FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

306.90

306.90

CBN SMIS

358.02

358.02

I&E FX Window

362.39

362.26

Cash Market

358.00

358.00

Transfer Market

362.50

362.50

Source: CBN, FMDQ, REXEL BDC

 

Eurobonds

The NGERIA Sovereigns closed the week on a positive note, as we noted renewed demand for the sovereign papers during today's session. Yields compressed by c.8bps on the average across the sovereign curve, with the mid-dated papers recording the most gains.

The NGERIA Corps sustained gains for a second consecutive trading session. We noted particular buy interests on the FIDBAN 2022s & ETINL 2024 which gained +12bps and +7bps respectively.


 

Proshare Nigeria Pvt. Ltd.

 

 

Proshare Nigeria Pvt. Ltd.


 

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 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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