Money Market Rate Decreased As Overnight Rate Fell to 22.50%

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Monday, January 14, 2019 12:27 PM / Anchoria AM Research

 

Money Market

The money market rate decreased last week as the Overnight rate (OVN) and Open Buy Back (OBB) fell to 22.50% and 20.00% respectively. Consequently, the average money market rate fell by 0.62% to settle at 21.25% as the System liquidity is estimated to have fallen to a negative figure of cN98.48bn from N256bn in the previous week. 

Major outflow for the week included: weekly Wholesale, Invisible and SME FX auction of $210mn, OMO sales of cN10bn on Tuesday and cN343bn on Thursday. While major inflow for the week included: OMO Maturity of cN375bn. 

We expect the rate to inch up on Monday as banks prepare for another round of FX intervention.


Instrument

04/01/2019

11/01/2019

Change

OBB

20.00%

20.00%

+0.00%

OVN

23.75%

22.50%

-1.25%

 

Forex: USD/NGN

The CBN Official rate halted its upward trend to close at N306.90/$, a 0.02% decrease. Also, the rate in the Investors and Exporters’ FX Window fell by 0.11% to close at N364.94/$. We however witnessed increased demand in the NAFEX market in the early part of the week with substantial volumes traded at N366.00/$. It closed with rates at N364.50/$ due to inflows into the market by foreign investors. Naira at the parallel market depreciated marginally to close at N363.00/$ (using the Everdon BDC Rate). 

We expect rates in the parallel market to remain constant as the apex bank continues to supply FX into the market, coupled with its frequent Wholesale and Retail SMIS programme.


04/01/2019

11/01/2019

Change

CBN Official Rate

306.95

306.90

-0.02%

I&E FX Window

365.35

364.94

-0.11%

Everdon BDC Rate

362.00

363.00

+0.28%

 

Commodities

The Brent Crude and WTI Crude Oil rose by 5.99% and 18.97% to close at $60.48 and $57.06 per barrel, this is due to strong demand from the world’s biggest oil importer. Also, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC allies, including Russia, have been cutting supply since late 2018, providing crude prices with some support.

 

Fixed Income

Bond: FGN

The Bond Market closed on a bullish note last week with yields compressing across all maturities with the exception of 2021s and 2037s bond. Average yields fell by 4bps to close the week at 15.29%.

The following factors are expected to shape the market in the week ahead, these include:

a)     Expected release of the Q1 FGN Bond Calendar by the Debt Management Office (DMO)

b)     Expectation of hike in inflation rate which is expected to be released on Thursday, 17 January 2019.

c)      CBN Monetary Policy Committee Meeting between Monday and Tuesday 21 -22 January 2019.

d)     Political uncertainty ahead of 2019 general election

 

We anticipate a relatively quiet bond market as demand remains lull during the week.


Secondary Market

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Source: Anchoria AM Research, FMDQ OTC

 

Treasury Bills

Despite the reduction in the system liquidity during the week, the treasury bills market traded on slightly bullish note. Consequently, the average yield fell by 10bps to close the week at 15.30%. Market activities were relatively active as the value of transactions rose to N1.00 trillion from N892.42 billion in the previous week. 

We expected cautious reaction from market participants as CBN is set to conduct its T-bill Primary Market Auction on Wednesday, 16 Jan., 2019.


Secondary Market

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Source: Anchoria AM Research, FMDQ OTC

 

FGN Eurobond

Proshare Nigeria Pvt. Ltd.

Source: Anchoria AM Research, FMDQ OTC

 

Corporate Eurobond

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Source: Anchoria AM Research, FMDQ OTC

 

NIBOR -1M, 3M & 6M

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Source: Anchoria AM Research, FMDQ OTC

 

FX Future Contracts -3M, 6M & 12M

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Source: Anchoria AM Research, FMDQ OTC

 

Key Release during the Week

a)     The Central Bank of Nigeria (CBN) released Q1 2019 Treasury Bills Issuance Calendar

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Anchoria Research: +234 908 720 6076;  research@anchoriaam.com

 

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