Buy-side, sell-offs, mixed sentiments hold firm across money market
Naira down N6 w/w to N522/$ in street FSDH, Vetiva analysts see tepid outing across T-bills, OMO, bonds up for bulls, near term Calmness to return to FX space as Naira finds assurance from IMF’s SDR allocation to Nigeria
MIXED SENTIMENT ACROSS the fixed income space last week saw bond participants remain buyside driven, while sell-offs were witnessed in the OMO and Nigerian Treasury Bills segments. In the meantime, the OMO space was generally quiet through the week, although sell-side pressure at the short-mid end of the curve was witnessed.
However, in the absence of a major catalyst to drive activities in the fixed income space, analysts at Vetiva Securities and FSDH Capitals have asserted that a tepid trading in the Nigerian Treasury Bills and OMO segments is anticipated this week given the constrained levels of system liquidity, while the bonds space is expected to remain bullish in the near term. However, a calm after the sudden demand pressure anticipated for the Naira.
FX Market
At the currency market last week, the Naira depreciated by N6 week on week to close at N522 against the dollar in the parallel market resulting from renewed pressure on the local currency and increasing demand for the dollar in the currency space. Though, sources within the market revealed that FX scarcity in the streets exists as demand outweighs supply giving rise to unmet demands.
Meanwhile, the Naira appreciated by N0.80 week on week at the Investors & Exporters’ FX window to close at N410.88 per dollar. Most market participants maintained bids of between
N400 and N413 per dollar all through the week.
Money Market
In money market trading, given a relatively low level of system liquidity, Overnight (O/N) rate ended the week down by 1.50 percent to close at 8.50 percent as against the last close of 10 percent, while the Open Buy
Back (OBB) rate decreased by 1.67 percent to close at 8.33 percent compared to 10 percent recorded on the previous close.
Treasury Bills Market
Across the Nigerian Treasury bills secondary market, it was a flaccid close due to major sell-offs witnessed during the week, with the average yield across the curve remaining unchanged at 4.95 percent. Also, the average yields across short-term, medium-term, and longterm maturities closed the week flat at 3.47 percent, 4.43 percent and 6.23 percent, respectively.
OMO Maturities space
Elsewhere, in the OMO bills market, the average return through the curve persisted in an unchanged manner to close the week at 6.04 percent. Similarly, the average yields across shortterm, medium-term, and long-term maturities shut the week on a flat close at 5.47 percent, 6.23 percent, and 6.68 percent, respectively.
In addition, last Wednesday, the Central Bank of Nigeria held an OMO auction where it sold bills worth N60 billion across the 89-day (N10 billion), 159-day (N10 billion), and 355-day (N40 billion) tenors with the stop rates remaining unaltered to print at 7.00 percent, 8.50 percent, and 10.10 percent, respectively.
Meanwhile, the level of demand was lopsided towards the long tenor maturity bills with the bid-to-cover ratios resolving at 1.70x for the 89-day, 1.80x for the 159-day, and 2.93x for the 355-day. Last Wednesday’s auction was oversubscribed, indicating a subscription level of 253 percent (N152.07 billion).
FGN Bonds
And at the FGN bonds secondary market, it was also a quiet close on Friday as the average bond yield across the curve remained unchanged at 8.38 percent. Thus, the average yields across the medium tenor and the long tenor of the curve decreased by 1 basis point and 2 basis points, respectively.
The average yield across the short tenor of the curve remained unchanged as the market recorded the 18MAR-2036 maturity bond as the best performer with a decline in yield of 10 basis points, while the 27-MAR2035 maturity bond was the worst performer with an increase in yield of 14 basis points.