New Week, Same Song: The Bears continue to control proceedings in the Fixed Income Market.

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Naira Gains against the USD at the I&E FX Window, Parallel (“black”) Market

The FGN bond market remained firmly bearish across the curve, with little demand seen despite the 2030s and 2045s bond coupon inflow hitting the system today. Slight action was seen on short-dated bonds, albeit in light volumes, with trades settling around 6.20% and 8.15% for the 2024s and 2027s bonds, respectively.

The 2049s bond lost the most ground in price terms on the day, hitting the double-digit mark of 10.00% in late trades, the highest level seen since August 2020.  Overall, yields expanded by another c.14bps across the sovereign curve compared to Friday’s closing.

We expect market demand for bonds to stay muted while attention shifts to the outcome of the first MPC meeting for the year scheduled for tomorrow, 26th January 2021.

Treasury Bills

The treasury bills space opened the new week on a bearish note as offshore participants continue to scramble to exit their last OMO winnings as they look to position ahead of this week’s auction.

The weak appetite for bills was further fuelled by low system liquidity as traders sell off to fund their cash obligations. The flurry of offers was seen across the OMO bills curve, albeit the 18th January 2021 bill remained the most attractive of all bills offered, with few trades crossed at 3.70% at the close of business.

We also saw a few order-driven requests for mid-dated NTB bills; however, no trades were executed as the bid/offer rates remained wide at 0.65%/0.35% all day, making it difficult to execute trades.

We expect a slight uptick in trading activities as OMO maturities of over N190BN hits the system tomorrow.

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Money Markets

OBB and OVN rates dropped significantly by 425bps, closing the day at 5.50% and 6.50%, as liquidity eased due to bond coupon inflows of c. N38bn hitting the banking system. System liquidity is estimated at c—N60Bn as at the close of business today.

We expect rates to ease further during tomorrow’s session as inflows from OMO maturities of over N190BN is credited into the system. 

FX Market

The FX space remained poorly supplied, with rates depreciating across all market segments for a 2nd consecutive session. The IEFX segments traded very leanly as market turnover dropped by an additional 10% (c.$39m), with the rate closing the day at N394.50/$1.

The parallel market also lost an additional N3.00 on both the cash and transfer market as demands from businesses and market players continue to peak in the new year.

Eurobonds

The NIGERIA Sovereigns opened the new week on a quiet note, with little volumes passing through during the session. The bulk of market action was noted at the curve’s belly, especially for the 2027s-2032s maturities, which shed an average of c.4bps D/D, while yields compressed by an average of c.3bps across the benchmark curve.

The NIGERIA Corps, on the other hand, was bearish for a larger part of the session supported by actions from participants, seeking to book some profits at the early start of the week. The Zenith 2022s was the major loser of all the tracked papers closing the day +c.38bps.