Money Market:
This week, the Central Bank of Nigeria (CBN) held the first Primary Market Auction (PMA) for the month of March last week. The auction was for instruments across three tenors (91-day, 182-day, and 364-day) on Wednesday. Also, the CBN held an Open Market Operation (OMO) auction on Thursday for only the 91-day tenor, given maturities worth N215.9billion (both OMO and T-bills) that hit the system on the same day.
For the Treasury Bills’ Primary Market Auction (PMA), investor interest was upbeat as all tenors were oversubscribed with bids-offers settling at 2.87x, 3.32x and 7.67x for the 91-day (Offer – N5bn, Subscription – N14.4bn, Stop rate – 10.75%), 182-day (Offer – N14.0bn, Subscription – N46.5bn, Stop rate – 12.5%) and 364-day (Offer – N70.5bn, Subscription – N539.7bn, Stop rate – 12.845%) instruments respectively.Dealers believe that the relatively higher-level oversubscription on the long tenor instrument was driven by an absence of a long tenor OMO issuance in the money market over the last two weeks. Foreign Exchange MarketThe naira remained broadly stable across all segments of the market last week following the sustained increase in the foreign reserves, which went up $400million compared with previous week (W-o-W) to $43.0billion (14-03-2018) largely driven by foreign portfolio inflows into the fixed income market.
In terms of the direction of rates, the Naira in the parallel market stood flat at N360.00/US$1.00 while the CBN spot rate depreciated by 5kobo to close at N306.95/US$1.00. Dealers from Afrinvest West Africa stated in a note to clients that at the Investors and Exporters Window (I&E), the NAFEX rate depreciated 28 kobo W-o-W to N360.18/US$1.00 from N360.46/US$1.00 in the prior week. Activity level in the market declined as total turnover fell to $1.7billion, down 58.0per cent W-o-W from US$4.1billlion in the prior week. However, total subscriptions in the FMDQ OTC futures market increased 8.8 per cent W-o-W to $7.3billion from $6.7billion as the February 2020 and January 2020 received the most buying interest, up 39.8per cent and 31.9 per cent W-o-W respectively.
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Bond Market
The average ask-yield on Sovereign naira bonds pared further in the week, declining by 6 basis points (bps) to settle at 14.3per cent as investors continue to take position in the still attractively priced instruments. The Debt Management Office (DMO) is scheduled to hold the last primary market auction for the first quarter on the 27th of March 2019, when the FGN APR 2023 and FGN FEB 2028 instruments will be auctioned through re-openings.
In the corporate Eurobonds space, the average yield across all bonds declined by 12bps to settle at 7.3per cent. There were yield declines across all bonds save for the Diamond Bank May 2019 (1.01ppts), and Seplat Petroleum 2023 which traded flat while the largest decline was recorded on the Zenith 2019 bond (0.75ppts), which matures on the 22nd of March 2019. In line with analysts expectations, investors have continued to take position in the attractively priced corporate Eurobonds, as fears regarding Frontier and Emerging Market (EM) countries have been suppressed by yield seeking imperative.
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