Daily performance of major economic indicators and highlights from tradings sessions and key statistics such as Treasury Bills, bonds, FX rates, inflation, oil price.

Markets Close on a Quiet Note as Tight System Liquidity pushes Funding rates Higher

KEY INDICATORS

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Bonds

The FGN Bond market traded on a quiet note to end the week with little volumes going in throughout the trading session. Investor sentiment weakened towards bond securities at current market yields. Consequently yields increased by a paltry single basis point across the curve to close the week.

We anticipate a very quiet FGN bond market going into next week, with further weakening of the yield curve expected as the demand flattens and some end-of-year profit taking trades expected.

Treasury Bills

The T-bills market closed out the week on a bearish note, as tighter system liquidity pressured yields on the NTB curve. Yields ticked higher by c.9bps on the average across the NTB curve, despite the lack of an OMO auction offer by the CBN on the day.
In the coming week, the CBN will likely resume its daily OMO Auction offering to manage expected inflows from FAAC payments and OMO maturities. Due to the holidays and reduced trading sessions, we expect the CBN to be aggressive in the volumes on offer as it keeps a tight lid on system liquidity.

Money Market

Money Market rates jumped higher by c.900bps as system liquidity tightened further on the back of outflows for the FX retail intervention by the CBN and Bond auction settlement. Open Buy-Back (OBB) and overnight (O/N) increased to 21.67% (from 13.58%) and 25.08% (from 14.83%), with System Liquidity estimated to close in a negative territory of c.N110bn.
We expect rates to open significantly higher in the coming week, as market participants provide funding for FX Wholesale interventions by the CBN. High funding rates should be short-lived due to inflows from November FAAC payments as well as OMO Maturities (N.588.89bn) expected later in the week. The CBN is also expected to aggressively mop up the excess liquidity, resuming its daily OMO auction offerings.

FX Market

At the Interbank, the Naira/USD rate remained unchanged at N306.95/$ (spot) and N359.24/$ (SMIS), while the NAFEX rate in the I&E window appreciated marginally by c.0.01% to close the week at N364.54/$ from N364.57/$ previously. Value traded at the I&E FX window increased by c.35.15% day-on-day, with a total trade turnover of $432.44mm traded in 514 deals, with rates ranging between N338.00/$ – N366.00/$.

Seasonal supply support the continued appreciation of the Naira at the parallel market. The cash rate appreciated further by c.0.33% to close at N362.80/$, while the transfer rate remained unchanged at N367.00/$.

Eurobonds

The NGERIA Sovereigns witnessed a quiet trading session, however with lower valuations as global oil prices continue to decline. Yields ticked higher further by c.3bps on the average across the curve.

Similarly, the NGERIA Corps saw little interest in the last trading session for the week, with no change recorded on the prices of the tracked tickers.


Disclaimer
Whilst proper and reasonable care has been taken in the preparation and accuracy of the facts and figures presented in this report, no responsibility or liability is accepted by Zedcrest Capital or its employees for any error, omission or opinion expressed herein. This report is not an investment research or a research recommendation and should not be regarded as such. The information provided herein is by no means intended to provide a sufficient basis on which to make an investment decision.

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