Investors Benefit From Elevated Short-Term Interest Rates Continue, Stay Short On Duration

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FGN Bonds

The FGN bond market opened the week relatively sluggish across the curve, with little demand seen despite the 2035s and 2050s bond coupon inflow hitting the system today.

Slight action was seen at the tail-end of the bond curve, albeit in light volumes, with the 2045s trading at 11.95% levels while short-covering trades continued to pressure the 2049s and 2050s which changed hands at 11.80% levels.

Overall, yields compressed by c.02bps on the average across the sovereign curve by the close of trading.

We expect market demand for bonds to stay muted in the interim as short-term rates remain elevated as well as expected slight selling pressure as the month draws to a close.

Treasury Bills

The treasury bills space opened the new week on more bullish as investors looked to reinvest inflows from bond coupons instead in short-term instruments. We saw improved demand on the short-dated treasury bills (30- to 90-day tenors), with most of the trades seen on the CBN Special Bills which offered better discount rates (at 6.00% levels).

We expect the market to trade more positively opening tomorrow, as OMO maturities improve banks’ funding positions and support some position-taking.

Money Markets

Liquidity in the Money Market opened the week relatively unchanged from last week’s close, as liquidity from coupon payments of c.N60Bn were canceled out by the annual NDIC premium debit imposed on local banks. Interbank rates climbed up by c.188bps on the average to close at 12.00% and 13.00% for OBB and O/N rates respectively.

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We expect funding rates to open lower tomorrow, as OMO maturities of N180.78Bn ease the pressure on the funding positions of local banks.

FX Market

The FX space opened the week amidst poor supply, as traded volumes dropped by 57% from the previous week’s close (c.$30.84mio traded). The Naira appreciated by N0.87k to close at N409.13/$, as the bid ranged tightened to between N400.00 and N410.50 to the dollar.

At the parallel market, the Naira strengthened by N1.10k as the transfer rate closed at N496.70/$. The cash rate remained unchanged from last week’s close at N482.50/$.

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.5bps D/D, while yields expanded by an average of c.3bps across the benchmark curve.

Similarly, the NIGERIA Corporates traded with bearish sentiments as we saw some participants seek to book some profits to close out the month. at the early start of the week.