March 22, 2017/InvestmentOne Research
MONEY MARKET
· System liquidity declined by N150bn to negative N173bn following the N160bn FG bond auction and the N34bn OMO auctions in the outgone week.
· Consequently, the 1month and 3month NIBOR rates increased while the 6month NIBOR rate trended downwards.
· We expect money market rates to remain high given the absence of OMO maturities and CBN’s stance in keeping liquidity tight.
BOND MARKET
· Yields declined on Tuesday following the release of the NBS’ inflation report, which showed a decrease in headline inflation to 17.78% in February (18.72% in January).
· However, w/w yields inched up 2bps to average 16.02% as investors exited positions following the FG bond auction on Wednesday.
· DMO sold N160bn worth of 5yr, 10yr and 20yr bonds at 16.24%, 16.29% and 16.28% stop rates respectively.
· Total sold was N30bn more than offered with stop rates on each maturity at least 25bps lower than the February auction.
· Going forward, we expect market activity to be influenced by liquidity levels, recently released inflation report and the outcome of the MPC meeting.
FOREIGN EXCHANGE MARKET
· Throughout the outgone week, the NGN closed flat at N306 levels against the USD at the interbank market due to the continued intervention by the CBN.
· However, the NGN gained +1.56% to N450 against the USD at the parallel market.
· Despite CBN increasing the frequency of its interventions, we expect the downward pressure on the local currency to persist as supply remains insufficient.
