Money Market Review

Money market rates trended downwards last week as aggregate system liquidity opened at surplus of N20.4billion on Tuesday. Open Buy Back (OBB) and Over Night (O/N) rates dropped to single digits for the first time in four weeks on Thursday closing at 7.8 performances and 8.3 performances respectively as system liquidity was buoyed by treasury (T)-bills maturity worth N129.7 billion.

However, OBB and O/N inched 7.9 per cent points higher apiece to close the week at 15.7 per cent and 16.2 per cent respectively on Friday as the Apex bank mopped up a total of N283.1billion from the system in an Open Market Operation (OMO) auction. As such, OBB and O/N lending rates rose 1.3 per cent and 1 per cent week on week (W-o-W.)

An investment banking group and dealing member of the Nigerian Stock Exchange, afrinvest West Africa Limited said in a note that performance in the treasury bills market were mixed but average T-bills rate trended southwards on most trading sessions. On Tuesday it added, average T-bills rate rose eight basis points (bps) to close at 17.7 per cent.

This was however reversed on Wednesday as average T-bills rate declined 0.7 per cent to close at 17 per cent amidst expectation of a lower stop rate at the Primary Market Auction (PMA) held on the same day. The Apex Bank auctioned N28 billion of 91-day, N33.5 billion of 182-day and N68.2 billion of 364-day instruments at stop rates of 13.9 per cent, 17.1 per cent and 18.3 per cent respectively. Much in line with market expectations, the average marginal rate at the auction was 11bps lower than the September auction. Also, the auction was oversubscribed by 2.4 xs with net subscription amounting to N311.9billion against net offered amount of N129.7 billion.  Average T-bills rate closed the week at 17.3per cent on Friday, up 3.2 per cent W-o-W.


Foreign Exchange Market

Despite the liquidity crunch which continued to strain performance in the currency market, interbank rate appreciated 1.6 per cent W-o-W to N306.75/$1 from N311.62/$1 on Friday last week. On the first trading day of the week, the Naira/Dollar exchange rate crashed to N320.31/$1 on Tuesday from N311.62/$1 in the previous session.

However, the naira/dollar exchange rate appreciated to N310.24/$1 by midweek and N306.71/$1 on Thursday on the back of the daily interventions by the Central Bank where about $1.5million was sold.

Similarly, parallel market rate appreciated 0.4 per cent W-o-W closing the week at N473.00/US$1.00 against N475.00/$1 in the previous Friday. Contrary to penultimate week when Naira/Dollar exchange rate surged, the exchange rate at the parallel market rate hovered between N473/$1 and N476/$1 during the week amidst speculations of dollar sales to Bureau-De-Change (BDC) operators by Travelex before the end of the week.

According to Afrinvest, in the futures market, the current total value of the open contracts of the Naira settled OTC futures for the 12 instruments on the calendar stood at $3.5 billion as at Thursday, 6th October, with the APR 26 2017 being the most subscribed at a value of $794.4 million. This was trailed by the JUL 21 2017 instrument, currently trading at N255.5/$1.

“In the week ahead, we expect the sale of dollars to the BDCs by Travelex to improve dollar liquidity at the unregulated segment of the FX market. Nevertheless, we do not expect significant appreciation in rate,” stated Afrinvest.


Bond Market Review and Outlook

The local bond market was largely quiet, but sentiments were mixed across tenors as investor interest was majorly skewed towards the short end of the sovereign yield curve during the week. Accordingly, average yield across benchmark bonds closed flat W-o-W settling at 15 per cent on Friday. Average yield rose 3bps at the end of the first trading session of the week closing at 15 per cent on sell offs predominantly in long dated instruments. Buy sentiment, however tepid, filtered into the market towards the end of the week as average yield across benchmark bonds dipped 1bp on Thursday to close at 14.9 per cent before settling at 15 per cent on Friday.

On the flip side, average yield on the South African, Nigerian and Zambian sovereign Eurobonds rose 16bps, 13bps and 3bps respectively. Nonetheless, the Zambian 2024 Eurobond currently commands the highest Year-to-Date (YTD) return at 23.2per cent whilst the South African 2017 recorded the most declines amongst the sovereign Eurobonds, with a Year to Year (YTD) loss of 4 per cent.

In the Nigerian corporate Eurobonds market, sell sentiment persisted on the Fidelity 2018 and Diamond 2019 instruments during the week as yields rose 1.1per cent and 64bps W-o-W respectively. Contrarily, investors hunted for bargain in the FBN 2020 and 2021 instruments as yields on both instruments dropped 3.6 per cent and 1.8 per cent W-o-W respectively.

Yield on the Access 2017 instrument also dipped 1.1per cent W-o-W as interest improved during the week.

Similarly, performance across the Sub Saharan Africa Eurobonds instruments was mixed last week. Increased interest was observed in Ghanaian Sovereign Eurobonds  as yields on the Ghana 2017, 2023 and 2026 declined 32bps, 14bps and 15bps W-o-W respectively. The Gabon and Ivory Coast sovereign Eurobonds also enjoyed similar sentiment as average yield on the Gabon and Ivory Coast sovereigns Eurobonds dipped 9bps and 8bps  W-o-W respectively.