Monday, July 13, 2020 / 5:40 PM / By AnchoriaAM Research / Header Image Credit: FX Empire

Money Market

The interbank market was highly illiquid for most partof the week due to lack of inflow until Thursday when the system witnessed someinflow such as CRR refund worth N300.00 billion, FX Swap maturities and OMOmaturities worth N92.52 billion.

Subsequently, the average money market rate fellsignificantly by 8.55% to settle at 13.95% from 22.50% in the previous week.Open Buy Back (OBB) closed at 13.80% compared to 21.50% in the previous weekwhile Overnight rate (OVN) closed at 14.10% compared to 23.50% the previousweek.

We expect the inflow from OMO maturities (N16.00billion) and FGN Bond coupon payments (N40.68 million) to boost the systemliquidity this week.

Forex: USD/NGN

With the current unification drive of the CBNfollowing the IMF requirement for disbursement of loan, the CBN adjusted theofficial rate to N381/$ from N361/$. Following this and coupled with Forexscarcity, naira at the I & E Fx window depreciated by 26bps to close theweek at N387/$, at the parallel market the cash rate depreciated by 2.17% toclose at N470/$.

We expect a continuous dwindling in the FX liquidityacross all FX windows this week.

Bond: FGN

The secondary sovereign Bond market closed bullishlast week as the average yield fell by 16bps to close at 7.95% compared to8.11% in the previous week. The highest yield decline was witnessed in theAPR-2023 bond which declined by 136bps to close at 4.11% compared to 5.46% theprevious week while the highest yield increase was seen in the FEB-2028 bondwhich closed at 8.37%.

The Sovereign Eurobond market closed on a bearish noteas the average yield rose by 29bps to close at 7.68% compared to 7.39% theprevious week due to uncertainty around the second wave of the corona virus.The Corporate Eurobond market closed bullish as the average yield fell by 6bpsto close at 7.91% compared to 7.97% the previous week.

We expect the bond market to be upbeat this week dueto anticipated increase in system liquidity and optimism in the crude oilmarket.

Treasury Bills

The Treasury bills market closed bearish last week asthe average yield rose by 2bps to close at 2.11% compared to 2.09% the previousweek. In the same vein, OMO bills rose by 49bps to close at 5.65% compared to5.15% the previous week.

We expect investors to take position in the Treasurybills auction expected during the week.

Commodities

Despite the rising cases of the pandemic and theuncertainty around the global economy, Gold futures rises to $1800 for thefirst time in nine years. The commodity, widely favored by investors as a storeof value in times of stress has been one of the best performing asset classesof 2020 as investors have looked for safe places to park their cash at a timeof heightened uncertainty for the global economy due to the Covid-19 crisis.

Brent Oil rose by 1.03% to close at $43.24 per barrelwhile WTI fell by 0.25% to close at $40.55 compared to N40.56 per barrel theprevious week.

Related News

1. Average Yield Rises 2bps WoW Due to Tight System Liquidity
2. Drab Day in Fixed Income Space Despite the Ease in System Liquidity
3. Sigh of Relief as CRR Refund and SWAP Maturities Inflows Boost Interbank System Liquidity
4. Money Market Rates Remain Stressed As Local Banks Queue Up For Liquidity From The CBN
5. OMO Bears Emerge As Annual AMCON Charge Further Squeezes System Liquidity
6. System Liquidity Crashes Into Negative Territory, Freezing Trading Activities In the FI Space
7. CBN Adjusts Naira Value to N380 per Dollar at the Secondary Market Interventions Sale
8. Strong Demand Persists at PMA; Average Yield Declines 15bps WoW
9. Calm Day in the Bonds Market, as Market Demand Shifts to Head of the Curve
10. CBN Keeps A Tight Hold On System Liquidity In OMO Auction
11. Rates Fall Again As Local Demand Piles Up At NTB Auction