By Kayode Tokede
Naira at the Investors & Exporters Foreign Exchange (I & EFX) on Monday window closed down by 0.02per cent and 0.30per cent against the and dollar at N564.51 and N414.90 respectively, while it closed up against the euro by 0.40per cent at N481.88.
The money market rates decreased today as Open Buy Back and Overnight rates fell by 67 basis points and 125 basis points to close at 15.33per cent and 16per cent respectively.
The bond market traded on a positive note on Monday as yields fell on most maturities.
The yields on the 5yr and 7yr and 10yr benchmark bonds decreased by 34 basis points, 38 basis points and six per cent at 9.97per cent, 11.22 per cent respectively and 11.96per cent.
However, analysts see steady treasury bills spot rates this week as the Central Bank of Nigeria (CBN) sets to roll over about N112 billion at the primary market auction schedule for the mid-week. Last week, the Nigerian Treasury bill market closed on a bearish note as yields witnessed a moderate adjustment amidst the Eurobond raise.
Investors were a bit cautious trying to rebalance portfolios following various market developments as the equities segment closed positive. United Capital in a note observed that the financial system liquidity was tight despite interbank rates slowdown, though in double-digit terrain.
Data from the FMDQ platform showed that Open Buy Back (OBB) and Overnight (OVN) rates tumbled 50 basis points each to close at 16.00% and 17.25% respectively. This, according to analysts, relates directly to the impacts of debits for bond auction settlement conducted by the Debt Management Office (DMO).
In the NTB secondary market, analysts also noted that performance was slightly bearish as average yield rose marginally by 4 basis points week on week to close at 5.61% from 5.57% at the close of last week.
Then, United Capital analysts said they saw marginal bearish sentiments in the secondary open market operations (OMO) market as the average yield closed higher at 6.43%, 9 basis points week on the week above the previous week’s close.
“Looking ahead, we expect to see system liquidity ease and inter-bank rates trend lower from the net inflows from FAAC and N105.0 billion worth of OMO maturities.”
This week, the Central Bank of Nigeria (CBN) is expected to conduct a Treasury bills auction rolling over a total of N111.9 billion worth of bills on Wednesday. At the auction this week, analysts said they do not expect the apex bank to hike stop rates as it did in the previous auction.
Recall that Debt Management Office (DMO) conducted a bond auction selling a total of N277.1 billion worth of bonds as against N150.0 billion on offer. Investors’ appetite across the offerings was strong as the 2028s, 2036s and 2050s recorded subscription rates of 1.0x, 2.5x and 3.1x respectively.
Overall, the auction was subscribed by 2.2x receiving a total bid of N334.3 billion. The marginal rates on 2028s and 2036s remained unchanged from the previous auction at 11.60% and 12.75%, respectively.
In the secondary bonds market, performance was reflective of the outcome in the auction (where marginal rate on the 2050s reversed to 13.00%) as United Capital analysts saw sell pressures on the long end of the bonds market while we saw buying interest at the end of the short and mid-term of the curve.
Overall, this reversed the sustained bearish sentiment from the previous week as the average yield on sovereign bonds declined by 8 basis points week on week to 11.23% from 11.31%, across the curve.
In the same vein, the corporate segment closed on a bullish sentiment as the average yield fell by 16 basis points week on week to 11.72per cent from 11.88per cent.
In the Eurobond market, the DMO confirmed the successful issuance of fresh Eurobonds with the offering attracting bids worth $12.2 billion, implying a bid-to-cover ratio of 4.1x considering an initial offering of $3.0 billion.
Overall, the DMO took advantage of the strong interest to sell $4.0 billion worth of Eurobonds ($1.0billion higher than initially planned) with the allotment across tenors printing at 7-year ($1.25billion at 6.125%), 12-year ($1.50bn at 7.375%) and 30-year ($1.25bn at 8.250per cent).
Consequently, proceedings from the secondary market were bearish average yield climbed by 28 basis points to close at 6.07%. On the other hand, analysts spotted the average yield declined by 12 basis points at the corporate Eurobond market to close at 2.60per cent.
“In the coming week, we expect to see slight see demand-led activities at the Eurobond market as investors seek to fulfil unmet demands from the auction”.