System Liquidity Rolls Back Into Negative As Banks Opens Fresh REPO With CBN

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FGN Bonds

The Bond Market traded on a relatively quiet note, with some slight demand seen at the short to mid-end of the yield curve. Trading volumes remained subdued with most of the market action seen on 2024s and 2027s papers which changed hands around 11.45% and 12.55% respectively.

At the long end of the curve, offers improved by 20bps to 13.20% on the 2045s paper while the 2049 bonds remained tightly quoted at 13.50%/13.40%. Consequently, yields compressed on the benchmark bond curve by a single basis point on the average.

We expect the market to remain sparsely traded as participants await the outcome of the FGN bond auction scheduled for tomorrow.

Treasury Bills

The current tight system liquidity continued to dictate the tune the T-bills market as trading activity remained low due to the one-sided nature of almost all interests (SELL side). We saw some firm buying mandates on the CBN Special Bills albeit most bids stayed steady above 9.30% levels while offers remained sub 9.00%, making it difficult to execute trades. On the NTB side, the buying interest lingered, with 2way quotes staying steady around 9.05/8.75 all day.

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We expect the market to remain choppy in the interim as banks continue to prioritize reducing their interbank funding by selling mostly OMO bills and CBN special Bills to cover their funding obligations.

Money Markets

Interest rates trended northwards by about c.50bps today as naira dealers scrambled to cover their positions amidst tight system liquidity. Local banks re-opened fresh Repos and increased their SLF positions with the CBN causing system liquidity to roll back into a deficit of -N75.35billion. Consequently, Open Buy Back (OBB) and Overnight (O/N) rates closed at 18.75% and 19.25%, respectively.

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For Tomorrow, we anticipate funding rates to remain steady at these levels, as no positive liquidity respite is expected to improve the system in the interim.

FX Market

At the IEFX space, we saw a 75% rise in the D/D supply of the greenback, as traded volumes increased to c.$169mio traded. As a result, the Naira appreciated by 0.41% closing the session at N410.00/$, while the market bids traded in a range between N387.67and N420.88 to the dollar.

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The Naira stabilized in the parallel market, as both the cash and transfer rates remained on changed at N497.00/$ and N513.00/$ respectively.

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The Nigerian Sovereign and other Sub-Saharan markets were pretty quiet for a 2nd consecutive session despite oil prices pushing above $75pb which is usually positive for Oil-producing sovereigns (Nigeria, Angola, and Ghana). Few actions were witnessed on selected papers for the ANGOLAs, IVYCST, and EGYPTs bonds while the Nigeria sovereigns stayed awfully quiet with the benchmark curve closing flat D/D,

The NIGERIA Corps tickers traded on bullish sentiment, especially on the ETINL 31s paper, which continued to attract major buy interest from investors. Price on the ETINL 31s strengthened by c.50cents to close at 101.50 on the offer D/D.


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