Anchoria Fixed Income Monitor: Undulating Interbank Rate

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Monday, February 10, 2020   /02:33 PM  / By Anchoria AM Research / Header Image Credit: Anchoria AM Research

 

Money Market

The average money market rate fell significantly last week by 8.75% to settle at 5.92% from 14.67% in the previous week. This is attributable to the inflows from OMO maturities worth N349.02 billion which boosted the system liquidity.

 

Notable Inflows includes OMO maturities - N349.02 billion, while Outflows were OMO sale - N128.20 billion and weekly wholesale, invisible $ SME FX auction of $210m.

 

The Open Buy Back (OBB) and Overnight rates (O/N) fell to 5.50% and 6.33% from 14.00% and 15.33% respectively due to OMO inflow of N349.02 billion.

 

We expect money market rate to decline in anticipation of NTB maturities of N154 billion and Bond maturities of N606 billion this week.

 

Forex: USD/NGN

The foreign exchange market was relatively stable last week as the CBN Official Rate fell by 2bps W-o-W to close at N306.95/$ while the rate at the I&E FX window rose by 11bps to close at N364.37/$ compared to N363.97/$ the previous week. The rate in the parallel market remained stable at N360.00/$.

 

Despite the decline in the country's external reserve to $36.96 billion WTD, we expect the rates in the market to remain constant as the apex bank continues to defend the naira.

 

Bond: FGN

The secondary sovereign Bond market closed bearish last week as the average yield rose by 15bps to close at 9.97% compared to 9.82% the previous week. The JAN-2022 bond witnessed the highest yield decline of 20bps to close at 6.87% while the FEB 2020 bond had the highest yield increase of 185bps to close at 4.79% compared to 2.94% the previous week.

 

The Sovereign Eurobond market closed on a bullish note as the average yield fell by 8bps to close at 5.97% compared to 6.05% the previous week. The narrative was different for the Corporate Eurobond market as the average yield rose by 5bps to close at 5.11% compared to 5.06% the previous week.

 

We expect demand to increase in anticipation of OMO and Bond inflows expected during the week.

 

Treasury Bills

The T-bills secondary market closed on a bearish note as the average yield rose by 4bps to close at 3.69% compared to 3.65% the previous week. Conversely, OMO bills appreciated by 47bps to close at 13.25% compared to 12.78% the previous week.

 

At the OMO bills auction held during the week, the CBN sold a total of N128.20 billion worth of bills - N20.40 billion for 180 day and N107.80 billion for 362 day - at respective stop rates of 11.60% and 13.05% respectively. However, the 82-day bill had no sale. (See next page for T-bills result)

 

We expect the continuous yield widening between the OMO bills and Treasury bills.

 

Commodities

The crude oil price fell by 6.34% to close at $54.47 for the week ended 07th February 2020 compared to $58.16 the previous week.

 

According to CNBC, OPEC's Joint Technical Committee met on Tuesday but were unable to conclude that the oil market was oversupplied, and that OPEC should further cut down the supply. The talks stretched on, and the prospect of the negotiations ending with no results sent oil prices down towards the end of the week. The coronavirus is still raging and global oil demand has taken significant hit. But the severity and duration of the slowdown is incredibly unclear.

 

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