Sentiment dominate fixed income
Rates trend higher at OMO auction while bearish momentum was sustained in domestic market Investors to maintain bearish position this week Robust system liquidity expected from N476.4bn OMO maturity set to hit banking system this week
THE CBN INTERVENED through its periodic supply of US dollars in the FX market, offering a total of $100 million using the Secondary Market Intervention Sales ...
ketForeign Exchange Mar
THE CBN INTERVENED through its periodic supply of US dollars in the FX market, offering a total of $100 million using the Secondary Market Intervention Sales (SMIS) Wholesale Window.
Last week at the foreign exchange market, the local currency depreciated N5 week on week in the parallel market as rates opened at N473 to the greenback and closed at N478 per dollar. Also, the CBN spot rate traded flat and unchanged from the past week to close at N379 to a dollar. At the Investors’ & Exporters’ (I&E) Window, activity level fell 22.4 per cent to $258.6 million from $333.5 million recorded in the previous week as the NAFEX rate opened at N405.13 to a dollar and closed at N410 by the end of the week, depreciating N5.33 week on week from N404.67 to the dollar.
Also, at the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts of the Naira settled at $7.5 billion, up to $199.2 million (+2.7 per cent) from $7.3 billion in the previous week following new subscription in the SEP 2022, DEC 2022 and JAN 2026 instruments. The JUN 2022 instrument (contract price: N449.95) received the most buying interest in the week with an additional subscription of $22.7 million which took total value to $25.2 million. On the other hand, the JUL 2021 instrument (contract price: N426.58) was the least subscribed, with an additional subscription of $0.5 million for a total value of $206.6 million.
Money Market
The fixed income market was largely unchanged as yields across markets rose marginally to an average of 5.8 per cent from 5.7 per cent in the previous week. Thus, the NT-bills market closed flat for the week, reflecting the mixed performance across the trading sessions. Thus, the average yield in the market remained at 1.5 per cent from the previous week. Consequently, the performance was muted as average yields across tenors closed flat at 1.6 per cent. The 91-day, 182-day and 364-day instruments traded at yields of 0.76 per cent, 1.96 per cent and 2.07 per cent, similar to the past week’s levels.
Elsewhere, with an OMO maturity bill worth N476.4 billion expected to hit the banking system for more robust system liquidity in the OMO market this week, the demand at the week’s auction was robust as the CBN conducted an OMO auction worth N180 billion to mop-up liquidity in the system. Thus, the 110-day (Offer: N20.0bn; Subscription: N52.68bn; Sale: N20.0bn), 180-day (Offer: N20.0bn; Subscription: N54.40bn; Sale: N20.0bn) and 362day (Offer: N140.0bn; Subscription: N350.73bn; Sale: N140.0bn) instruments were oversubscribed by 2.6x, 2.7x and 2.5x at marginal rates of 7.0 per cent, 8.5 per cent and 10.1 per cent respectively, similar to the previous auction. Meanwhile, a sustained buying interest was noticed in the first three trading sessions of the week while the market traded flat in the remaining sessions.
Bonds Market
Furthermore, the selling pressure in the bonds market eased last week as the yield curve expanded by 40 basis points to 9.4 per cent from 9 per cent from the previous week compared to a 100 basis points surge in yields during the past week. Across the curve, the long (+55bps), the intermediate (+28bps), and short (+27bps) segments all closed bearish.
In the same vein, the Debt Management Office (DMO), during the week sold N33.6 billion, N28.9 billion, and N18 billion across the FGN MAR 2027, FGN MAR 2035, and FGN JUL 2045 instruments at 10.25 per cent, 11.25 per cent and 11.80 per cent. Also, the marginal rates cleared above market rate and were higher than the previous auction (7.98%, 8.74% and 8.95% for the three tenors accordingly). While marginal rates rose, the DMO only allotted N80.5 billion out of the N150 billion offer it brought to the market, while non-competitive allotment stood at a cumulative of N48 billion.
Performance in the secondary market remained bearish last week as average yield rose 16 basis points week on week to 9.2 per cent as the market recorded losses on the first 4 trading days. Across tenors, the mid and long-term bonds recorded sell-offs with yields up by 38 basis points and 4 basis points week on week respectively. Conversely, the shorttenor instruments saw gains as average yields declined 2 basis points week on week.
Across the sub-Saharan Africa Eurobond market, there was a slightly bearish performance as average yield rose 3 basis points to 7.5 per cent. The Ghanaian 2022 instruments recorded the highest sell-offs with yields up 2.9 per cent week on week. On the other hand, the Zambian instruments recorded gains as yields on the 2022 and 2024 instruments declined 2.9 per cent and 1.7 per cent respectively.
For the African Corporate
Eurobonds, the performance was mixed as 6 of 18 instruments recorded sell-offs. However, marginal gains were noticed as the average yield fell 1 basis point to 4.2 per cent. Zenith Bank and UBA 2022 instruments were the top gainers as yields declined 20 basis points and 19 basis points week on week respectively. On the flip side, Eskom Holdings 2025 and Office Cherifien 2044 lost the most from the previous week as yields increased 19 basis points and 16 basis points respectively.