Money Market Rate Increased as Overnight Rate Rose to 7.17%

Culled—Proshare

October 2, 2018/Anchoria AM Research 

Money Market

The money market rate increased last week as the Overnight rate (OVN) and Open Buy Back (OBB) rose to 7.17% and 6.00% respectively. Consequently, the average money market rate rose by 2.21% to settle at 6.59% despite an increase in system liquidity to close at cN580bn as a result of inflow of cN260bn from OMO T-bill maturities, FAAC fund of cN300bn and CBN retail FX refund of cN204bn in spite of an outflow in respect of reversal of Paris Club payments made to states by the FG, Bond Sales of cN96.74bn and Wholesale, Invisibles and SME FX auction of $210mn.

We expect rates to inch up on Monday as banks are expected to fund for another round of FX sales in the Wholesale, Invisibles and SME Market. Barring significant inflow and anticipated OMO during the week, the rate is expected to close the week higher.

Forex: USD/NGN

The CBN Official rate and the rate in the Investors and Exporters’ FX Window continued on its upward trend to close at N306.35/$ and N363.92/$ with 0.02% and 0.07% increase respectively. Naira at the parallel market remained unchanged to close at N361.00/$ (using the Everdon BDC Rate).

We expect rates in the parallel market to remain constant as the apex bank continues to supply FX into the market coupled with its frequent Wholesale and Retail SMIS programme.

Source: Anchoria AM Research, FMDQ OTC 

Commodities

The Brent Crude oil and WTI crude oil rose by 4.97% and 3.49% to close at $82.72 per barrel and $73.25 per barrel respectively following the decision of OPEC not to increase their oil production and as US reiterated its sanctions on Iran during the UN meeting. 

Also, US Energy Secretary ruled out tapping the Strategic Petroleum Reserve, compounding concerns that sanctions on Iran will tighten the markets.

Fixed Income

Bond

The Bond market traded on a bullish note last week with yields falling across all maturities traded. This is against the backdrop of increased buying interest from local participants (Pension Fund Administrators and Asset Managers). The FEB 2028 and JUL 2034 bonds were the most traded bonds during the week with N49.82bn and N40.45bn value traded respectively. Average yield fell by 15bps to close the week at 14.91%. 

During the week, the following activities shaped investors sentiments: a) increased in spot rate at the Bond Auction b) Increase in Federal Reserve rate c) Maintain status quo for the Monetary Policy Rate (MPR).

September Bond Auction Result

Secondary Market

Source: Anchoria AM Research, FMDQ OTC 

Treasury Bills

Due to decreased system liquidity at the earlier part of the week, the treasury bills market traded on a bearish note. Consequently, the average yield rose significantly by 42bps to close the week at 13.19%. Market activities were relatively quiet as value of transactions rose to N1.08trillion from N1.51trillion in the previous week.

Secondary Market

Source: Anchoria AM Research, FMDQ OTC