Bonds & Fixed Income | |
Bonds & Fixed Income | |
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Monday, September 03, 2018 10:45AM /Anchoria AM Research
Money Market
The money market rate decreased marginally last week as the Overnight rate (OVN) and Open Buy Back rate (OBB) fell to 6.83% and 6.00% respectively. Consequently, the average money market rate decreased by 0.92% to settle at 6.42% due to increase in the system liquidity to close at cN780bn due to an inflow from OMO T-bills maturities of cN315bn and CBN retail refund of cN360bn despite an outflow from Wholesale, Invisible & SME FX auction of $210mn, Retail Auction of cN350bn and CRR of cN2.9bn during the week.
Despite another round of FX sales in the Wholesale,
Invisibles and SME Market on Monday, we expect rates to decline further on
Monday due to expected inflow from FAAC this week. Barring several OMO auctions
during the week, we expect the rate to close lower for the week.
Instrument |
24/08/2018 |
31/08/2018 |
Change |
OBB |
6.75% |
6.00% |
-0.75% |
OVN |
7.92% |
6.83% |
-1.09% |
Source: Anchoria AM Research, FMDQ OTC
Forex: USD/NGN
The CBN Official rate and the rate in the Investors and Exporters’ FX Window rose by 0.02% and 0.08% to close at N306.15/$ and N362.35/$ respectively. Naira at the parallel market remained unchanged to close at N360.00/$ (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.
24/08/2018 |
31/08/2018 |
Change |
|
CBN Official Rate |
306.10 |
306.15 |
+0.02% |
I&E FX Window |
362.35 |
362.64 |
+0.08% |
Everdon Rate |
360.00 |
360.00 |
+0.00% |
Source: Anchoria AM Research, FMDQ OTC
Commodities
The Brent Crude oil and WTI crude oil rose by 2.11% and 1.57% to close at $77.42 per barrel and $69.80 per barrel respectively due to anticipation of the impact of the U.S. sanctions on Iran.
The exports of crude oil from Iran have already been declining and the market reflect concerned regarding potential supply deficit starting from November when the U.S. sanctions targeting Iran come into effect.
U.S. Imports of oil maintained the same level in the week ending Aug. 24 compared with the reported level of previous week. Meanwhile, U.S. net imports of oil decreased by 657,000 barrels per day during the week.
Fixed Income
Bond
The Bond market traded on a bearish note last week with sell offs in most of the tenors. Sell offs was more pronounced on the JAN 2026 bonds (+38bps). The 2027 and 2036 bonds were the most traded bonds during the week with N95.37bn and N105.80bn value traded respectively. Average yield rose by 30bps to close the week at 14.85%. This can be attributed to the following a) expected increase in FGN borrowing; b) weak investors’ sentiment across Emerging Markets.
Secondary Market
Source: Anchoria AM Research, FMDQ OTC
Treasury Bills
Despite a buoyant system liquidity during the week, the treasury bills market traded on a bearish note following the result of the primary market auction. Consequently, the average yield rose by 5bps to close the week at 12.20%. Market activities was relatively active as value of transactions rose to N955.84bn from N413.61bn in the previous week.
During the week, T-bills Primary Market Auction spot
rate witnessed an increase with 100.29% subscription rate.
91 days:
Rose from 10.00% to 11.00%
182 days:
Rose from 10.40% to 12.30%
364 days: Rose from 11.22% to 13.05%
Primary Market Auction – 29 August
2018
Source: Anchoria AM Research, CBN
Also, the CBN declared a no sale OMO results during the week as most participants bidded at a high rate.
Secondary Market
Source:
Anchoria AM Research, FMDQ OTC
Related News
1. September
2018 FGN Savings Bond Offer for Subscription
2. Bond Market
Closes the Month Bearish as EM Pressures Persist
3. Bond Yields Hit
9-Month High as CBN holds off on OMO Sale
4. Bond Yields to
Break 15% Resistance, as DMO Clears 1yr PMA Bill at c.15% Effective Yield
5. Bond Bulls
Cherry-Pick on Higher Yielding Maturities as Market Maintains Balance
6. Summary of
August 2018 FGN Bond Auction Results
7. Short end T-bill
Yields Trend Lower as Market players Maintain Risk Averse Posture
8. Fixed Income
Market Monitor - Average T-Bills Yield Fell by 5bps to Close The Week at 12.15%