Monday, June 15, 2020 / 03:18
PM / by Anchoria AM Research / Header Image Credit: Nasdaq
The system liquidity shrank last week due to the absence of inflow for the first 3 days in the week, hence the money market rate was at double digit before OMO Maturity of N92 billion came in on Thursday.
Consequently, the average money market rate fell significantly to close the short week at 9.33% from 16.15% in the previous week. The Open Buy Back (OBB) and Overnight rates (O/N) fell to 8.83% and 9.83% from 15.60% and 16.70% respectively while the system liquidity closed the week at c.160.23 billion.
We expect inflows from OMO maturities worth N355.20 billion to boost the system liquidity this week.
The Nigeria's external reserve halt its 3 weeks consecutive increase as the reserves fell by 0.21% to close the week at $36.48 billion. This was due to CBN intervention in the FX market and decline in the price of crude oil. Despite the decline, the naira appreciated to N385.75/$ at the Investors and Exporters (I&E) window. The CBN official and Parallel market rate remained unchanged to N361/$ and N450/$ respectively.
We expect pressure in the foreign exchange market to increase ahead of opening of airport by June 21st, 2020.
The secondary sovereign Bond market closed bearish last week as the average yield rose by 7bps to close at 10.08% compared to 10.02% in the previous week. The highest yield declined was witnessed in the JAN-2022 bond, fell by 54bps to close at 5.56% while the highest yield increase was witnessed by the APR-2029 bond which grew by 34bps to close at 10.96%.
The DMO announced the result of the 3rd Sovereign 7-year Sukuk at 11.20% for which it offered N150 billion to investors. The offer attracted a very high level of subscription from investors with total subscription of N669.124 billion, representing a subscription level of 446%. The DMO allotted N162.557 billion to investors. The impressive demand for the Sukuk came from a wide range of investors which included Ethical funds, Insurance companies, Fund Managers and Retail investors amongst others.
We expect more renewed interest in the bond market this week due to anticipated improvement in system liquidity.
The T-bills secondary market was relatively stable last week as yields closed at 3.39%, similar to the yield the previous week. This is due to low system liquidity. Conversely, OMO bills fell by 10bps to close at 4.98% compared to 5.08% the previous week.
The Debt Management Office of Nigeria (DMO) rolled over a total of N90.94 billion at the NTB's primary auction held during the week. The office took advantage of the huge demand across the three tenors offered to cut stop rates by an average of c.49bps on the 91 and 182 days, while maintaining the rate on the 364 days' paper. (See next page for NTB result).
Brent fell by 8.44% to close at $38.73 compared to $42.30 the previous week while WTI fell by 8.32% to $36.26. This is attributed to news of US crude oil inventory build-up.
Meanwhile, during the week OPEC+ decided to cut oil production due to declined demand for crude oil, despite the agreement between Saudi Arabia, Russia and other oil producers to reduce oil production.
Major oil producers cut oil output by 9.7 million barrels per day, about 10% of normal oil demand and they also agreed to extend oil output.