June 13, 2017/InvestmentOne Research
Please click to download the Fixed Income and Currency Market Report for the Week ended 9th June 2017
MONEY MARKET
· Money market rates expanded across all tenors in the outgone week despite the maturity of c.N74bn worth of OMO bills.
· The inflow from the maturities was offset by CBN’s FX auctions and the sale of c.N60bn worth of OMO bills during the week.
· While there are no OMO maturities in the coming week, we expect CBN’s FX auctions as well as OMO sales to keep system liquidity tight. As such, we see money market rates remaining high.
BOND MARKET
· Despite the squeeze in system liquidity from the CBN’s OMO and FX auctions, yields in the bond market shed -8bps w/w to average 16.08%.
· This was largely the result of demand for bonds at the mid to long end of the yield curve while the yield on short dated maturities increased.
· Given the CBN’s stance on system liquidity, we expect yields in the fixed income space to remain range bound in the absence of offshore demand.
FOREIGN EXCHANGE MARKET
· Due to CBN’s sustained intervention at the close of trading at the interbank market, the local currency continued to close at N305-306 levels against the USD.
· With this said, the NGN gained +1.90% w/w to N368 against the USD at the parallel market as CBN sold $190m into the market on Tuesday.
· In the coming week, we expect NGN’s performance to see support from CBN’s FX intervention sales as well as the recent circular by CBN allowing banks to trade in the I&E FX window, which should be a positive for liquidity.
