Yield to trend lower as OMO, T-bills maturities of N370bn, N104.9m hit system
Investors, Analysts expect fall in the domestic bond yields this week Naira strengthened against the dollar by N8 w/w in the parallel market
The Nigerian naira edged the dollar by N8 to N457 per dollar in the parallel market last week while at the official window, the CBN spot rate remained unchanged at N379/$1. However, the NAFEX rate depreciated by 83 kobo from the previous week at the Investors & Exporters (I&E) Window to close at N385.83/$1. Furthermore, the weekly turnover at the I & E window slipped 36.4 per cent to $329.2 million from the $517.5 million recorded in the previous week.
Also at the aggregate value of the open contracts at the FMDQ Securities Exchange FX Futures Contract segment improved by 0.6 per cent ($66.4 million) week on week and settled at $11.2 billion. The DEC 2020 instrument (contract price: N394.55) recorded the strongest demand with an additional subscription worth $20.4 million, putting the total value at $2.1 billion. Meanwhile, the MAY 2021 (contract price: N408.74) and AUG 2021 (contract price: N417.25) instruments recorded $1 million additional subscriptions apiece, bringing their respective values to $692.84 million and $239.63 million.
Interest rates
OBB and OVN rates opened the market last week at 0.9 per cent and 1.6 per cent respectively from the previous week’s close of 1.0 per cent and 1.6 per cent as system liquidity rose to N1.4 trillion. On Wednesday, OBB and OVN rates declined to 0.8 per cent and 1.4 per cent respectively as system liquidity lowered to N386.3 billion. By the close of the week, OBB and OVN rates surged to 4.0 per cent and 4.9 per cent respectively as system liquidity settled at N1.1 trillion.
T-Bills
In the secondary T-bills market, there was a bullish outing as average yield declined 21 basis points week on week to 1.5 per cent. There was strong demand across the board although; the 182 and 364-day instrument had the most buying interest as yields dipped 30 basis points apiece. The yield on 91- day instruments also dropped 10 basis points.
Bonds
In the domestic bond market last week, the bullish sentiments were sustained as average yield continued to dwindle, down 37 basis points to 6.3 per cent. The trading session kickedoff on Monday with the average yield rising 3 basis points following sell-offs on short tenor bonds. However, the market closed on a positive on the remaining trading days. Across tenors, the medium-term instruments recorded the most buying interest with the average yield down 63 basis points from the previous week. Similarly, the average yield on the long and short-term instruments declined 18 basis points apiece.
Across the SSA Eurobonds space, there was a bullish performance as average yield fell 55 basis points to 9.5 per cent from last week. The Nigeria 2021 and Senegal 2021 instruments recorded the most buy interest as the respective yields fell 182 basis points and 82 basis points week on week.
Trailing, the yield on the Nigerian 2032 and Senegal 2031 instruments declined 81 basis points and 80 basis points from the last week respectively. Conversely, Ghana 2022 and Zambia 2022 recorded sell-offs with the yields rising 22 basis points and 13 basis points from last week respectively.