Culled—Proshare

June 8, 2020

by Anchoria AM Research

Money Market

The average money market rate rose significantly last week by 13.55% to settle at 16.15% from 2.60% in the previous week. This is attributable to the outflow from OMO auction worth N70.00 billion and CRR debits of N459.72 billion by the Central bank.

Other outflows for the week included weekly FX wholesale SMIS of $210mn while inflows came from OMO maturities worth N149.68 billion. 

We expect the constraint in the system liquidity to continue as no inflow is expected in the coming week.

Forex: USD/NGN

Nigeria’s external reserve continued its increase as the reserves grew by 0.16% to $36.56 billion. This is attributable to the recent surge in oil prices from $35.33 to $42.30 from the previous week. The naira depreciated to N386.50 per dollar at the Investors and Exporters (I&E) window, due to the high demand in the foreign exchange market. The CBN official rate retained its position at N361.00 while at the parallel market, rate rose by 6.25% to N450/$.

We expect pressure in the foreign exchange market to reduce as crude oil price improves and the country’s external reserve recovers.

Bond: FGN

The secondary sovereign Bond market closed bullish last week as the average yield fell by 9bps to close at 10.02% compared to 10.11% in the previous week. The highest yield decline was witnessed in the MAR-2024 bond, fell by 46bps to close at 8.50% while the highest yield increase was witnessed by the JUL-2021 bond which grew by 25bps to close at 5.26%

The Sovereign Eurobond market closed on a bullish note as the average yield fell by 83bps to close at 7.91% compared to 8.73% the previous week. The Corporate Eurobond market also closed bullish as the average yield fell by 204bps to close at 9.49% compared to 11.54% the previous week.

We expect increased interest in both domestic bond and Eurobond as the Oil price continues its upward trend at above the $30 per barrel price and rates in money market remain low.

Treasury Bills

The T-bills secondary market closed on a bearish note last week as the average yield rose by 129bps to close at 3.39% compared to 2.12% the previous week. Conversely, OMO bills fell by 97bps to close at 5.08% compared to 6.05% the previous week. 

At the OMO bills auction held last week, the CBN sold a total of N70 billion across the 3 tenors offered, despite healthy demand of about N298billion bided by local banks and offshore portfolio investors. Stop rates closed at 4.95% – 82 day, 7.79% – 173 day and 8.99% – 341 day respectively. (See next page for OMO bills result).

Commodities

Organization of Petroleum Exporting Countries and its allies (OPEC+) have agreed to extend its output cuts by one month in order to support the oil price recovery. The current output cut, which is to end by late June, is part of measures taken by the organization to rebalance the oil market. The group has agreed to maintain its current output cut of 9.7 million barrels per day till the end of July as against the 7.7 million barrels per day that was initially planned. 

Brent rose by 19.73% to close at $42.30 compared to $35.33 the previous week while WTI rose by 11.44% to $39.55. This is also attributable to the reopening of economies and expanded demand from China.