July 5, 2017/InvestmentOne Research
MONEY MARKET
· The O/N rate contracted by 375bps w/w to settle at 5.75% following the improvement in system liquidity from OMO maturity and FAAC inflows.
· However, pressure from CBN OMO auctions saw money market rates increase across all tenors
· While there will be inflow from OMO maturities of c.N65bn, we expect CBN to auction new bills to keep system liquidity tight. As such, we see upward pressure on rates across tenors.
BOND MARKET
· Yields on FGN bonds closed marginally lower w/w. This was largely due to increased demand at the tail end of the week.
· Hence, yields on the 5yr, 7yr and 10yr benchmark bonds contracted by 4bps, 3bps and 1bp to close the week at 16.12%, 15.88% and 16.19% respectively.
· Given the CBN’s stance on system liquidity, we expect yields in the fixed income space to remain at current levels in the coming week in the absence of offshore demands.
FOREIGN EXCHANGE MARKET
· At the interbank market, the Naira shed -0.02% w/w against the USD to close at N305.90 as CBN maintained its intervention.
· Also, the local currency closed flat at N368/$, at the parallel market as CBN sustained its Special Market Invention Sales (SMIS).
· In the coming week, we expect the NGN’s performance to see support from CBN’s FX 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.
