Money Market Rate Decreases as Overnight Rate Falls to 11.42%

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Monday, October 29, 2018 / 11:17 AM / Anchoria AM Research

 

Money Market

The money market rate decreased last week as the Overnight rate (OVN) and Open Buy Back (OBB) fell to 11.42% and 10.33% respectively. Consequently, the average money market rate fell by 2.13% to settle at 10.88% due to increased system liquidity to close at cN257bn. Inflow for the week included: OMO bills maturity of cN372.85bn, CBN Retail Refund of cN180bn and Paris Club refund of cN155bn while Outflow included: OMO sales of cN186.02bn, Bond Sales of cN88bn, bi-weekly Retail FX auction of cN350bn and Wholesale, Invisible and SME FX auction of $210mn.

 

With expected inflow from FAAC allocation this week we expect to rate to trend lower.

 

Instrument

19/10/2018

26/10/2018

Change

OBB

12.67%

10.33%

-2.34%

OVN

13.33%

11.42%

-1.91%

Source: Anchoria AM Research, FMDQ OTC 

 

Forex: USD/NGN

The CBN Official rate continued on its upward trend to close at N306.55/$, a 0.02% increment while the rate in the Investors and Exporters’ FX Window fell by 0.05%. Naira at the parallel market remained unchanged to close at N362.00/$ (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.

 

19/10/2018

26/10/2018

Change

CBN Official Rate

306.50

306.55

+0.02%

I&E FX Window

364.02

363.84

-0.05%

Everdon Rate

362.00

362.00

+0.00%

Source: Anchoria AM Research, FMDQ OTC

 

The Brent Crude oil and WTI Crude oil fell by 3.04% and 2.52% to close at $77.62 per barrel and $67.59 per barrel respectively. This represents third weeks of consecutive fall in the prices of the Crude Oil futures.

 

Factors contributing to the bearish sentiment in crude oil prices include:

  1. a 1-rig increase for Oil & gas in the United States,
  2. Canada’s oil and gas rigs for the week increased by 9 rigs after losing 4 rigs last week, bringing its total oil and gas rig count to 200, and
  3. Saudi Arabia and Russia pledged to offset any shortfall from Iran supply.

 

Fixed Income

Bond

The Bond market continued on its bearish trend last week with yields rising across most maturities traded and selloffs pronounced on short and mid tenor bonds. This is due to increase in spot rate at the OMO auction held during the week. Average yield rose by 10bps to close the week at 15.12%.

 

During the week, the spot rates on the 2023 and 2025 bonds at 15.00% and 15.15% respectively, while the spot rate on the 2028 bond ticked higher by c.7bps to 15.32% from its level (15.249%) at the previous auction.

October Bond Auction Result

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Secondary Market

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Source: Anchoria AM Research, FMDQ OTC

 

Treasury Bills

Despite a relatively high system liquidity during the week, the treasury bills market traded on a bearish note as market participants reacted to the OMO auction result. Consequently, the average yield rose by 20bps to close the week at 13.73%. Market activities were relatively quiet as the value of transactions rose to N1.02 trillion from N1.23 billion in the previous week.

 

The CBN is expected to hold its Treasury Bill Primary Market Auction on Wednesday, 31 October 2018.

Secondary Market

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

 

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