Buy-side sentiments pervade FIM, but naira calm despite CBN boost
● T-Bills market closes flat as investors plan funds movement to bonds
THE FIXED INCOME MAR KET traded on a positive note last week as investors remained buy-side driven across the OMO and bonds segments of the space. The yield across benchmark bonds eased four basis points from last week on average, due to interest across the bonds curve.
However the outcome last week, analysts have hinted at the expectation of a quiet trading session to kickoff from Monday’s trading as investors turn their attention to the forthcoming bonds auction. Similarly, it is expected that the NTB and OMO spaces will likely trade in a tepid manner, given constrained system liquidity. Meanwhile, the local naira is expected to stay calm across various windows of the currency market as the Central Bank maintains its FX interventions in the market.
FX and Money market:
In the foreign exchange market, with new FX pressures on the scene and despite the revelation by the apex bank to boost foreign exchange supplies to commercial banks, which will see Nigerian travellers gain access to forex at a maximum of $4,000 per trip, the Naira depreciated N0.2 week on week at the Investors and Exporters FX window to close at N411 per dollar last week, while it traded flat week on week at N495 against the dollar in the parallel market. Thus, most participants maintained bids of between N400 and N412 per dollar.
Furthermore in the money market, the Overnight (O/N) rate rose by 0.50 percent to close at 19.25 percent as against the last close of 18.75 percent, and the Open Buy Back (OBB) rate also rose by 0.50 percent to close at 18.75 percent from 18.25 per cent. Analysts pointed that a major driver for this was the reduction in the Repo volumes in the market.
T-Bills Market
At the Nigerian Treasury Bills secondary market at the end of last week, the market closed on a flat note with the average yield across the curve remaining unchanged at 6.35 percent. Thus the average yields across the short-term, medium-term, and long-term maturities closed flat at 4 percent, 5.56 percent, and 8.42 percent, respectively. It can be noted, however, that the treasury bills space has remained quiet following two consecutive month on month drop in the headline inflation rate.
In the OMO bills market, the average yield across the curve remained unchanged at 9.66 percent while the average yields across shortterm and medium-term maturities closed at 9.36 percent and 9.60 percent, respectively. However, the average yield across the long-term maturities declined by 1 basis point. OMO 15-Mar-22 maturity bill witnessed mild buying interest, with the yield falling by 9 basis points. Moreover, at the OMO auction held by the CBN on June 17, the apex bank sold bills worth N17.30 billion across the 89-day (N3 billion), 159-day (N4.30 billion), and 348-day (N10 billion) tenors with the stop rates remaining unchanged at 7 percent, 8.50 percent, and 10.10 percent, respectively.
The auction was oversubscribed by players, and indicated a subscription level of 316 percent (N63.10 billion). However, the demand was skewed towards long tenor maturity bills with bid-to-cover ratios settling at 0.60x (89-day), 1.84x (159-day), and 5.09x (348day) respectively.
Bonds Market
Elsewhere in the bonds market, the FGN bonds secondary market closed on a mildly negative note last week as the average bond yield across the curve cleared higher by 2 basis points to close at 9.87 percent from 9.85 percent the previous week. The average yield across the short tenor of the curve expanded by 10 basis points. However, the average yields across medium tenor and long tenor of the curve declined by 31 basis points and 17 basis points, respectively. The 18-JUL-2034 maturity bond was the best performer with a decline in yield of 75 basis points, while the 18-MAR2036 maturity bond was the worst performer with an increase in yield of 31 basis points.