Positive momentum in domestic bonds fails to lift OBB, OVN as rates trend lower
Pressure on yields in secondary market as DMO surprises with N30bn bonds Investors’ expectant of OMO-bill maturity worth N285bn hinged on a system awash with liquidity Naira’s strength wanes by N5 against dollar w/w on street market
FX Market
At the parallel market last week, the naira depreciated N5 to close at N462 per dollar; while at the CBN spot rate remained at N379 to a dollar. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate traded flat at N385.83 per dollar. Activity level in the I&E Window increased by 18.9 per cent to $512.8 million from $431.2 million recorded in the previous week.
At the FMDQ Securities Exchange FX Futures Contract Market, the total value of open contracts of the naira increased 0.2 per cent ($24.5 million) to $11.2 billion. The SEPT 2021 instrument (contract price: N420.09) received the highest subscription of $20 million which took total value to $168.3 million. On the other hand, the AUG 2021 instrument (contract price: N417.25) recorded the least subscription worth $1 million with a total value of $240.6 million.
Money Market
The Open Buy Back (OBB) and Overnight (OVN) money rates opened last week at 2.5 per cent and 3.5 per cent respectively, lower than 4.0 per cent and 4.9 per cent recorded at the close of the previous week despite system liquidity falling to N175.2 billion from N1 trillion. On Wednesday, the OBB and OVN rate fell to 1.8 per cent and 2.6 per cent respectively from 2.3 per cent and 3.7 per cent (on Tuesday) and declined further on Thursday to 1.3 per cent and 2.2 per cent due to increased system liquidity from OMO maturities. And then on Friday, the OBB and OVN rates closed the week at 1.2 per cent and 2 per cent respectively as system liquidity rose to N528.7 billion.
Bonds Market
The domestic bonds market remained upbeat last week as average yield fell 125 basis points to settle at 5 per cent. Across tenors, the long-term instruments recorded the most buying interest as average yield dropped 170 basis points week on week while the medium-term instrument shed 120 basis points. Similarly, the average yield on the short-term instruments fell by 18 basis points. The FGN 2034 and FGN 2035 instruments were the best performers as the respective yields fell 2.2 per cent and 2 per cent week on week to 5.9 per cent and 6.1 per cent respectively. On the other hand, FGN 2024 was the only loser as its yield rose marginally by 20 basis points to 3.4 per cent.
In the SSA Eurobonds segment, bearish sentiment resurfaced as average yield rose 0.6 per cent week on week to 10.1 per cent. The Nigeria 2021 and Senegal 2021 instruments recorded the most gains as their respective yields fell 46 basis points and 24 basis points week on week to 1.2 per cent and 1.9 per cent. On the other hand, ZAMBIA 2024 and 2022 Eurobonds were the worst performing instruments for the week as their yields rose 3.5 per cent and 6.1 per cent respectively to close at 37.5 per cent and 53.7 per cent.