Fixed Income Monitor: T-Bills market closed positive due to buoyant liquidity -

The money market rate increased last week as the Overnight rate (OVN) and Open Buy Back (OBB) rose to 17.29% and 16.43% from 10.57% and 9.86% respectively. Consequently, the average money market rate rose by 6.65% to settle at 16.86%.

Major outflow for the week included: OMO Sales of cN161.69 bn, Weekly Wholesale, Invisible and SME FX auction of $210mn, Bond auction of cN97.40bn and Biweekly Retail FX auction while Major inflow for the week included: OMO maturity of cN30bn and CBN retail FX auction refund of cN175bn.

Barring any significant liquidity mopping action of the CBN, the money market rates are expected to trend lower due to expectation of inflow from FAAC payment and OMO maturity of N62 billion.

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Bond: The Bond Market closed on a bearish note last week as the DMO held its monthly Bond Auction in which the debut 30 years Bond was issued. Average yields rose by 14bps to close the week at 14.29%.

The Bond Auction last week witnessed 149% subscription rate with the Debt Management Office (DMO) allotting a total of N97.4 billion. The 30-year Bond was priced at 14.80%.

Treasury Bills: The secondary treasury bills market closed on a bullish note last week due to relatively buoyant liquidity and expectation of reduced spot rate in the Primary Market auction which is scheduled to hold this week. Average yield rose by 14bps to close at 13.12.

Forex: USD/NGN: The CBN Official rate fell marginally by 0.02% last week to close at N306.90/$ while the rate in the Investors and Exporters’ FX Window rose by 0.10% to close at N360.64/$ due to decrease in market turnover rate by 16.33% week-on-week to $1.20bn from $1.43bn in previous week However, Naira at the parallel market remained unchanged to close at N360.00/$ (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.