Investors chase T-bills, bonds in mixed sentiments as Naira in 4-year tumble to N525/$
THE FIXED INCOME MAR KET OPERATED in a mixed fashion over the course of last week with investors pursuing treasury bills and bonds, while sell-off was witnessed on the OMO papers. This week, both investors and traders say they expect trading in the market to remain active, with the T-bills segment most likely to continue on a bullish run as investors take prompts from the most recent PMA results.
Meanwhile, in the absence of any significant catalyst in the macro space, a trading pattern similar to last week’s is predicted to play out in the bonds market.
FX Market
The local currency reacted significantly in the street market to the announcement by the CBN to halt the sale of FX to BDCs as a means to curb the illegal activities of racketeering, round-tripping and profiteering in the currency market. The Naira jumped to its highest point of weakness since 2016 at N525 to the dollar and subsequently closed the week at N513.50 to the greenback in the parallel market.
Meanwhile, it appreciated N0.02 week on week at the Investors and Exporters’ FX window to close at N411.44 per dollar. Analysts say it is expected that the naira remain largely stable across the various windows of the currency space as the CBN maintains
T-bills seen in bullish zone, mixed outing for bonds, OMO maturities this week; Naira to trade calm across segments
interventions in the FX market.
Money Market
Elsewhere in the money market; As at the close of the week, the Overnight (O/N) rate decreased by 3.25 percent to close at 7.75 percent as against the last close of 11 percent, and the Open Buy Back (OBB) rate also decreased by 3.25 percent to close at 7.50 percent compared to 10.75 percent in the previous session.
Following the announcement by the apex bank at the just concluded
MPC meeting, the CBN has directed all Deposit Money Banks (DMBs) to set up teller points at designated branches across the country to fulfill legitimate FX requests for Personal/ Business Travel Allowances (PTA), tuition fees, medical payments, SMEs transactions, amongst others. Moreover, the DMBs are required to establish electronic application and alert systems to update customers on the status of their FX requests.
Treasury Bills Market
The Nigerian treasury bills secondary market closed on a positive note with average yield across the curve decreasing by 36 basis points to close at 5.90 percent, as the average yields across short-term and medium-term maturities declined by 95 basis points and 58 basis points, respectively. However, the average yields across the long-term maturities increased by 4 basis points. Also, the yields on 11 bills fell with the 14-Oct-21 maturity bill recording the highest yield decline of 112 basis points, while yields on 8 bills advanced with the 9-Jun-22 maturity bill recording the highest yield increase of 14 basis points.
Moreover, the CBN held its scheduled Primary Market Auction on July 28, selling Nigerian T-Bills worth N265.24 billion across the 91-day (N3.17 billion), 182day (N3.54 billion), and 364-day (N258.53 billion) tenors. The stop rates for the 91-day and 182-day remained unchanged at 2.50 percent and 3.50 percent, respectively. However, the stop rate for the 364-day tenor cleared lower at 8.20 percent (-47 bps). The auction was oversubscribed by 110 percent, with bidto-cover ratios settling at 0.59x (91-day), 0.18x (182day), and 2.73x (364-day).
In the OMO bills market, the average yield across the curve decreased by 2 basis points to close at 8.69 percent. Trifling buying interest was seen across the short-term maturities with the average yield falling by 6 basis points. However, the average yields across medium-term and longterm maturities closed the week flat at 8.79 percent and 9.12 percent, respectively. Yields on 3 bills compressed with the 10Aug-21 maturity bill recording the highest yield decrease of 26 basis points, while yields on 21 bills remained unchanged.
Bonds Market
In the bonds market, the FGN bonds secondary market closed on a bullish rhythm as the average bond yield across the curve cleared lower by 13 basis points to close at 9.25 percent from 9.38 percent. Average yields across short tenor and long tenor of the curve declined by 18 basis points and 3 basis points, respectively. However, the average yields across the medium tenor of the curve increased by 8 basis points. The FGNSB 16-OCT-2021 bond was the best performer with a decline in yield of 95 basis points, while the 23-FEB-2028 maturity bond was the worst performer with an increase in yield of 17 basis points.