Money Market Review

Rates in the money market remained in the double digit band and trended higher on all days of last week due to tighter system liquidity. On Monday, aggregate system liquidity opened lower at about N188.2 billion from N269.8billion on Friday, thus Open Buy Back (OBB) and Overnight (O/N) rates settled at 17.0 per cent and 19.0 per cent respectively.

Dealer at Afrinvest West Africa disclosed with no major inflow or outflow from the system on Tuesday the OBB rose 1.0 per cent to settle at 18.0 per cent while the O/N rate  marginally eased 8basis points (bps) to 18.9 per cent. On Thursday, the over allocation at the Treasury-bills auction offset the expected impact of the N131.5 billion open market operation (OMO) maturity thereby reducing liquidity levels and driving OBB and O/N rates 1.4 per cent  and 1.3 per cent northwards to 19.4 per cent and 21.2 per cent respectively.

Liquidity levels improved on Friday, thus rates eased to 16.6 per cent and 17.6 per cent. As a result, OBB and O/N rates declined week on week (W-o-W), down 4.2 per cent and 5.2 per cent to 16.6per cent and 17.6per cent respectively.

Trading in the Treasury -bills market opened the week on a bearish note on account of lower liquidity in the system as well as investors expectation of higher stop rates at the T-bill auction on Wednesday. On Monday average T-bills rates settled at 13.5per cent sustaining the trend on Tuesday as average rates rose 0.5 per cent. On Wednesday, there was a T-bills maturity of N36.9 billion (91 Days), N39.2 billion (182 days) and N52.0 billion (364 days) however the same amount was scheduled to be rolled over and all instruments were oversubscribed at the auction but the 364 days instrument was over allotted at N129.0 billion.

Consequently, average rates at T-bills market rose to 14.7 per cent on Thursday. Average rates rose 3.1 per cent W-o-W to settle at 14.7 per cent.


Foreign Exchange

The volatility which began in the market fortnight ago persisted last week as the local unit weakened on all but one trading day of the week. The depreciation of the currency that was recorded last week was tightly linked to the cessation of foreign exchange (FX) intervention by the CBN during the week until Friday.

At the interbank market, the naira weakened on all trading days of the week saves for Wednesday. On Monday, the domestic currency traded at N292.15/ $1.00. On Tuesday, the naira further depreciated to N294.57/ $1.00 but appreciated mildly to N294.23/ $1.00 on Wednesday. On Thursday, there was another massive depreciation at the spot market as the naira fell to N310.43/ $1.00 before strengthening to N305.25/$1.00 on Friday. Parallel market rate waned throughout the week, down 3.6 per cent W-o-W from N365.00/ $1.00 last Friday to N378.00/ $1.00 by the end of the week.

In the week ahead, currency analysts at Afrinvest West Africa Limited expect the Apex Bank may carry out interventions and clear up some of the pent up FX demands to soften the pressured rates at the interbank market amidst Monetary Policy Committee (MPC) expectation.


Bond Market

Sentiments in the Bonds market were rather bearish last week as investors sold off across board. Average yields rose 30bps across benchmark instruments to close at 14.9per cent on Monday. On Tuesday, the sell offs in the market moderated with increased buying interest in the mid to long tenured instruments driving average yields marginally down three bps.

On Wednesday, the sell offs in the market continued especially at the shorter end of the curve as average yield across benchmark instruments rose 17bps to 15.0 per cent. Likely linked to the T-bills auction, on Wednesday which signalled a better investment opportunity for investors. On Thursday, investor sentiment further waned as average yields increased 29bps to close at 15.3 per cent.