(Greenwich Merchant Bank): The Fixed Income Market turned bearish for the week, following selloffs seen across the Bond and the NT-bill market. Investors exited positions after a comment on the intent of the Apex bank to phase-out participation of international players in the OMO-bill market; however, the Apex bank debunked this claim. Consequently, average yield in the fixed income market spiked marginally by 3bps to 5.6%, from 5.6% the prior week.
The NT-bill secondary market caught the frenzy which led to selloffs across the tail of the curve, raising the average yield across the market marginally by 4bps to close at 1.5%, from 1.5% the week before. In contrast, the OMO-bill market livened, as investors scurried for available bills at the tail of the curve, following the comments of phasing-out participation. Thereby, yields at the OMO-bill market eased by 8bps on the average, to close the week at 6.0% from 6.1%.
While we await the release of the Apex bank’s second quarter NT-bills issuance calendar, we expect the CBN would rollover maturing bills worth c. NGN460.2bn across the 91-DTM, 182-DTM, and 364-DTM at superior rates in the second quarter. Meanwhile, the CBN rolled over NGN4.1tn worth of maturing special bills at 0.5% for another 91-days. Recollect, the CBN securitized the excess Cash Reserve Ratio (CRR) charge on Deposit Money Banks (DMBs) as “special bills” at 0.5% for 91 days, rollable at the Apex bank’s sole discretion.
At the start of trade on Friday, the interbank system tightened in terms of liquidity following settlement obligation from the OMO-bill auction in the week. As a result, Money Market rates spiked into double digits for the week, as the Overnight and Open Buy Back closed at an average of 15.8% juxtaposed with 6.0% in the prior trading week.
The Bond Market turned bearish for the week, following heightened selling interest across the head and the tail of the bond curve. As a result, the average bond yield steeped northward by 14bps to 9.4%, from 9.2% at the close of trading in the prior week.
The FX market traded sparsely in the week, as the Naira depreciated by NGN0.75 at the Investors and Exporter Window (I&EW), closing at NGN411.00/USD from NGN410.25/USD in the prior week. In terms of turnover, the FX market eased by 51.2% WoW at the I&EW to an average of USD45.9mn from USD94.0mn at the prior session. On the flip side, the Naira strengthened by NGN2.00 at the Parallel Market against the Dollar, to settle at NGN480.00/USD from NGN482.00/USD in the prior week.
In the coming week, we expect market players to continue to trade cautiously with mixed sentiment across the curve, while seeking opportunities to cherry-pick higher yielding papers across the curve.