(Greenwich Merchant Bank): Activity in the T-bills market was muted as trades settled mostly flat WoW. On average, yields dipped 1bp to 0.1%, masking investors cherry-picking at the tail of the curve. Even though trading oscillated between the Bulls and Bears at the start of the week, the market tempo waned despite unfilled orders from Wednesday’s PMA.
At the PMA, a strong appetite for the bills on offer drove stop rates to record lows. The Apex bank sold NGN150.60bn worth of bills across 91-day (NGN20.37bn), 182-day (NGN19.16bn), and 364-day (NGN111.07bn). Bid coverage ratio came in at 2.8x, 2.9x and 3.0x as stop rates trended south to 0.0215% (91-day), 0.09% (182-day) and 0.15% (364-day) from 0.035%, 0.15% and 0.30% respectively.
Moving on, bullish sentiment pervaded the OMO market pushing yields 3bps lower to average 0.1%. The short and intermediate segment of the market was largely bought but moderated by selloffs on the long end.
Elsewhere, the Overnight and Open Buy Back eased to 1.3% and 1.5% from 4.3% and 3.3% respectively last Friday, following robust system liquidity supported by inflows from coupon payment and maturities in the week. We expect inflows of NGN418.92bn next week from maturing OMO bill and NGN5.63bn in bond coupon payment.
This week the rally in the Bonds market strengthened as bullish sentiments dominated trading. The yield curve compressed by 12bps to average 3.9% from 4.0% at the close of trading in the prior week. Across the curve, the short and long ends are contracted by 35bps and 10bps respectively.
Meanwhile, the mid-tenor instruments stayed flat due to major profit-taking on 22-JAN-2026 (+44bps) which offset pockets of demand at the belly of the curve. Notably, the 27-JAN-2022 instrument (-83bps) was the toast of investors.
Based on a circular from the CBN, there has been an adjustment in the following rates effective Monday, November 30, 2020:
i) IMTOs to banks NGN388/USD
ii) Banks to CBN NGN389/USD
iii) CBN to BDCs NGN390/USD
iv) BDCs to end-users Not more than NGN392/USD
Notably, the volume of sales for each market was pegged at USD10,000.00 per BDC.
In the Parallel FX market, the Naira sustained its downtrend weakening by NGN11.00/USD to trade at NGN495.00/USD on Friday, from its close of NGN484.00/USD in the previous week. Consequently, the currency depreciated by NGN33.00/USD or 6.7% since the start of November.
The I&E window was also pressured, closing NGN4.42/USD weaker to trade at NGN390.25/USD on Friday vs. NGN385.83/USD last week. Notably, the I&EW hit a high of NGN393.25/USD during the week.