Money Market Rate Decreased As Overnight Rate Fell To 16.17%

January 21, 2019/Anchoria AM Research

Money Market

The money market rate decreased last week as the Overnight rate (OVN) and Open Buy Back (OBB) fell to 16.17% and 15.33% respectively. Consequently, the average money market rate fell by 5.50% to settle at 15.75% as the System liquidity is estimated to have increased to cN381bn from a negative figure of N98bn in the previous week. Major inflow for the week included: OMO maturity of cN560bn and T-Bill PMA Maturity of cN73.4bn while outflow for the week included: weekly Wholesale, Invisible and SME FX auction of $210mn, OMO sales of cN552bn and biweekly retail FX intervention.

We expect the rate to inch up on Monday as banks prepare for another round of FX intervention.

Forex: USD/NGN

The CBN Official rate continued its downward trend to close at N306.85/$, a 0.02% decrease. Also, the rate in the Investors and Exporters’ FX Window fell by 0.59% to close at N362.79/$. We observed a relative weak demand in the I&E Window, hence a fall of cN3.00 last week. Naira at the parallel market appreciated marginally to close at N362.50/$ (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.

Source: Anchoria AM Research, FMDQ OTC

Commodities

The Brent Crude and WTI Crude Oil rose by 5.99% and 18.97% to close at $60.48 and $57.06 per barrel, on the backdrop of positive news regarding talks to end the US – China trade war.

Other factors include:

1. a) Decline in US Oil rig count. According to Baker Hughes, the number of active U.S. rigs drilling for oil dropped by 21 to 852 this week.
2. b) Decline in Production by Organization of the Petroleum Exporting Countries (OPEC).

Fixed Income

Bond: FGN

The Bond Market closed on a bullish note last week with yields compressing across most maturities. Average yields fell by 6bps to close the week at 15.23%. This is due to increased demand from both local investors and foreign investors. During the week, we observed a significant inflow in the I&E FX window from offshore investors.

The following factors are expected to shape the market in the week ahead, these include:

1. a) Expected Inflow from coupon payment for 2022 and 2020 Bond maturities
2. b) Expected release of the Q1 FGN Bond Calendar by the Debt Management Office (DMO)
3. c) CBN Monetary Policy Committee Meeting between Monday and Tuesday 21 -22 January 2019.
4. d) Political uncertainty ahead of 2019 general elections
   

We anticipate an increased demand during the week as investors are expected to invest their coupon payment worth cN79bn.

Secondary Market

Source: Anchoria AM Research, FMDQ OTC 

Treasury Bills

Due to the increase in the system liquidity during the week, the treasury bills market traded on slightly bullish note. Consequently, the average yield fell by 40bps to close the week at 14.91%. Market activities were relatively active as the value of transactions rose to N1.83 trillion from N1.0 trillion in the previous week.

Secondary Market

Source: Anchoria AM Research, FMDQ OTC

FGN Eurobond

Corporate Eurobond

NIBOR -1M, 3M & 6M

Source: Anchoria AM Research, FMDQ OTC

FX Future Contracts -3M, 6M & 12M

Source: Anchoria AM Research, FMDQ OTC

Key Release during the Week

a)     Primary Market Auction Result – Wednesday, 16 January 2019

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