March 28, 2017/InvestmentOne Research
MONEY MARKET
· Rates remained high for better part of the week owing to pressure on system liquidity from OMO and FX auctions.
· With inflow from FAAC allocation, rates eased on Friday as OBB and OVN ended the week at 9% and 10% respectively.
· There is expected inflow of c.N51bn OMO maturity hitting the system on Thursday. We see CBN selling OMO bill to mop up this liquidity.
· We expect money market rates to remain high on expectation of continuous OMO bill sales by the CBN in defense of the local currency..
BOND MARKET
· Bond market was largely bullish with demands on long-dated instruments putting downward pressure on yields.
· Yields contracted by an average of 15bps, with the yield on the 10yr benchmark bonds settling at 15.79%.
· During the week, the DMO announced the result of the FGN Saving bond auction , putting total subscription at c.N2bn
· We expect bond yields to remain range bound during the week given limited system liquidity.
· However, yields are likely to trend further south in subsequent weeks given expected inflow of c.N400bn worth of bond maturing in April.
FOREIGN EXCHANGE MARKET
· The NGN weakened by –0.16% w/w against the USD to close at N370, as CBN sold c.$200m worth of Forward contracts to FX users.
· At the parallel market, the Naira appreciated by 15.4% w/w against the USD.
· We expect NGN performance to see support from FX sales by the apex bank.
