A Slow Start into The New Week as Market Activities Remain Dampened in The Fixed Income Space

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Naira Gains against the USD at the Bureau De Change, Parallel (“black”) Markets Brandspurng
Afolabi Sotunde Illustration Naira

The FGN bond market kicked off the new week on a sluggish note, with light trading volumes consummated in the market despite bond coupon inflows hitting the system. Bond maturities, especially at the curve’s belly, remained aggressively offered throughout the day with very few bids to match.

However, towards the close of business, activities picked up slightly on the 2028s and 2029s bond, which traded within the range of 7.85%-8.00%. Consequently, yields expanded by c.4bps on the average across the benchmark bond curve.

We expect the market to remain sluggish tomorrow as institutional investors queue up their demand towards the monthly FGN Bond auction scheduled to hold on Wednesday. 

Treasury Bills

The Treasury bills market started the week on a tepid note as market participants continue to shy away from the market due to the unattractive yields. Offshore players remained firm sellers of OMO T-bills throughout the trading session as they seek to position for another OMO auction expected to hold later this week.

We saw a few trades executed on the January 2021 bills at 2.50%; however, this was not enough to lift the market mood. The NTB space was also quiet, although we saw few order-driven demands for the new 1yr issue, with trades executed around 0.80%.

We expect trading activities to improve slightly as inflows from tomorrow’s OMO maturities (N226.31BN) should support T-bills’ market appetite. 

Money Markets

Interest rates remained depressed (trading sub 1%) as the Money Market remained flush with cash. System liquidity opened the day at c. N374.62bn positive, buoyed by the 2034 bond coupon inflows of c. N66bn hitting the system.

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We expect funding rates to drop further tomorrow as inflows from OMO T-bills maturity of N226.31Bn are expected to boost market liquidity. 

FX Market

The I&E FX Market started the week on a positive note, supported by inflows from exporters, which was duly matched with outstanding demand. Consequently, rates strengthen slightly by N0.84k (0.21%) to close at N393.89/$ with trading volumes improving by 71% D/D at the window.

Parallel market rates continued to weaken as the Naira depreciated by N1.50k (0.32%) against the greenback to close at N474.00/$ in the cash market. In contrast, the transfer rate held steady, closing at N485.00/$ for another consecutive trading session. 

Eurobonds

Trading activities in the SSA Eurobond space today was muted mainly as most participants remained on the sidelines due to the U.S. market closure for MLK Day. For the NIGERIA Sovereigns, the 2032 bond was the major loser today (+10bps) D/D, while the sovereign curve expanded by an average of c.5bps.

In a similar vein in the SSA space, yields on both the ANGOLA and GHANA bond curves closed lower by -c.2bps on the average.

We also witnessed a slow trading session in the NIGERIA Corps space, with yields expanding slightly on most tracked papers except on the ACCESS 2021s, which compressed by -c.2bps.