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Money Market Rate Increased As Overnight Rate Fell To 17.42%

Bonds & Fixed Income	3201 VIEWS
Bonds & Fixed Income
3201 VIEWS

Monday, March 04, 2019 11:58 AM / Anchoria Research

Money Market

The money market rate increased last week as the Overnight rate (OVN) and Open Buy Back (OBB) fell to 17.42% and 16.33% respectively. Consequently, the average money market rate fell by 2.67% to settle at 16.88% due to the increase in the System liquidity to cN250bn from a negative figure of cN180bn in the previous week. Major inflow for the week included: OMO Maturity of cN350bn, Coupon Payment on the 2028s Bond and CBN Retail Refund of cN165bn while Major Outflow include Weekly Wholesale, Invisible and SME FX auction of $210mn, OMO Sale of cN1.08trn and Bi-weekly FX auction of cN360bn.

We expect the rate to close higher this week barring any significant inflow as CBN prepares for another round of FX auctions on Monday and anticipated OMO auctions during the week.

Instrument	22/02/2019	01/03/2019	Change
OBB	18.83%	16.33%	-2.50%
OVN	20.25%	17.42%	-2.83%

Source: Anchoria AM Research, FMDQ OTC

Forex: USD/NGN

The CBN Official rate grew by 0.02% to close at N306.80/$ while the rate in the Investors and Exporters’ FX Window fell by 0.13% to close at N361.03/$. We observed an increase in the market turnover in the I&E Window as market turnover hit an all-time high on the back of increased FPI inflows. In a similar vein, Naira at the parallel market appreciated by 0.28% to close at N361.00/$ (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.

	22/02/2019	01/03/2019	Change
CBN Official Rate	306.80	306.85	+0.02%
I&E FX Window	361.49	361.03	-0.13%
Everdon BDC Rate	361.00	360.00	-0.28%

Source: Anchoria AM Research, FMDQ OTC

Commodities

Despite optimistic US and China trade deal, the Brent Crude Oil and WTI Crude Oil fell by 3.05% and 2.55% to close at $65.07 and $55.80 per barrel respectively due to comments from President Trump, while the rally late in the week was due stronge U.S. economic data.

Fixed Income

Bond: FGN

Following the announcement of the Presidential Election Result, the Bond Market closed on a bullish note with demand more pronounced on 2020s (-199bps) and 2028s (-80bps) bonds. One of the major factors for the bull run in the bond space is the increase in Foreign Portfolio Investment (FPI) as Offshore investors allocate Funds to some assets in Emerging Economies. Average yields fell by 74bps to close the week at 13.95%.

We expect the bull run to continue this week as Offshore Investors continue to invest more in Emerging Economies and on the backdrop of the release of the FAAC allocation.

Secondary Market

Proshare Nigeria Pvt. Ltd.

Source: Anchoria AM Research, FMDQ OTC

Treasury Bills

Due to the increase in system liquidity during the week, the treasury bills market traded on a bullish note. Consequently, the average yield fell significantly by 1.36% to close the week at 12.98%. The T-Bills Primary Market Auction conducted during the week witnessed significant oversubscription rate of 632% with most demand seen on the one-year bill.

Secondary Market

Proshare Nigeria Pvt. Ltd.