(Greenwich Merchant Bank): The Fixed Income market trailed in a bearish tone from the prior week. The average yield in the fixed income market rose to 2.1% from 1.9% in the prior week. Major sell-offs were observed in the Bond and OMO-bills markets.
Sentiments in the NT-bills Market were mixed, investors cherry-picked bills at the head to the belly of the NT-bill market while profit-taking held sway at the tail of the curve following worse than expected spot rate for the 364-day bill at the week’s Primary Market Auction (PMA). Thereby, the average yield in the NT-bills market eased by 5bps WoW to settle at 0.4% from 0.5% in the prior week.
On the flip side, the OMO-bills market closed bearish following sell-offs at the medium to the long end of the curve while major bids at the short end of the curve could not offset the pessimism.
Consequently, the average yield at the OMO-bills market soared for the week to 0.5% from 0.4%. In its scheduled Primary Market Auction (PMA), the CBN rolled over maturing NT-bills worth NGN7.0bn across the 91DTM at 0.0480% (prev. 0.0100%), 182DTM at 0.5000% (prev. 0.0600%) and 364DTM at 0.1390% (prev. 0.3200%) for the 364DTM.
The average bid-to-cover ratio for the auction stood at 17.4x as investors scurried for the sparse bills offered in light of the prevailing robust liquidity witnessed in the market.
Moving on, Money Market rates remain in single digits, albeit spiked following settlement obligations following PMAs across the NT-bills, OMO-bills, and the Bond market. Thus, the Overnight and Open Buy Back closed at 4.5% and 4.5% from 0.88% and 0.5% respectively in the prior week.
As averseness intensified in the Bond Market, investors booked profit across the curve with market direction remaining uncertain in light of the CBN’s introduction of special bills and the better-than-expected marginal rates at the bond PMA in the week. Consequently, the average bond yield elevated by 62bps to 5.3% from 4.7% at the close of trading in the prior week.
The Debt Management Office (DMO) in its final PMA for the year sold bonds worth NGN30.0bn of NGN60.0bn offered across the 12.50% FGN MAR 2035 and the 9.80% FGN JUL 2045 papers. Bid range in the PMA widened as investors sought more yields, consequently, the DMO sold the 12.50% FGN MAR 2035 and the 9.80% FGN JUL 2045 papers at 6.95% (prev. 5.00%) and 7.00% (prev. 5.79%) respectively.
Forging ahead to the new week, we expect the uncertainty hovering around forward rates to continue to fuel bearish sentiments in the market as market players seek clarity going into the new year.
The Naira weakened at the Parallel market, closing at NGN477.0/USD from NGN474.0/USD in the prior week, however, turnover spiked by 6.8% in the Investors & Exporters Window (I&EW) to a weekly average of USD172.0mn vs. USD161.4mn in the prior week. Nevertheless, the Naira remained flat in the I&EW to close at NGN394.0/USD.