Money Market Rate Increased As The Overnight Rate Rose To 10% From 5.93%

Culled—Proshare

May 13, 2019

By Anchoria AM Research

Money Market

The money market rate increased last week as the Overnight rate (OVN) and Open Buy Back (OBB) rose to 10.00% and 9.14% from 5.93% and 5.29% respectively. Consequently, the average money market rate increased by 3.96% to settle at 9.57%. The System Liquidity is estimated to have increased to close at cN590bn from cN250bn from previous week. Major Inflow for the week included: OMO Maturity of cN151bn, CBN retail refund of cN250bn and inflow from CBN discounted promissory note while major outflow for the week included: Weekly Wholesale, Invisible and SME FX auction of $210mn, OMO Sales of cN456.38 (cN312.38bn on Monday and cN144bn on Thursday). 

Barring any significant inflow this week, we expected the money market rates to inch upward as the CBN issue OMO.

Instrument 03/05/2019 10/05/2019 Change
OBB 5.29% 9.14% +3.85%
OVN 5.93% 10.00% +4.07%

Source: Anchoria AM Research, FMDQ OTC 

Forex: USD/NGN

The CBN Official rate rose marginally by 0.02% last week to close at N307.00/$ while the rate in the Investors and Exporters’ FX Window inched slightly up by 0.06% to close at N360.88/$ despite an increase of 12% in average market turnover during the week. However, Naira at the parallel market remained unchanged to close at N361.00/$ (using the Everdon BDC Rate).

We expect rates in the parallel market to remain constant as the apex bank continues to supply FX into the market, coupled with its frequent Wholesale and Retail SMIS programme.

03/05/2019 10/05/2019 Change
CBN Official Rate 306.95 307.00 +0.02%
I&E FX Window 360.65 360.88 +0.06%
Everdon BDC Rate 361.00 361.00 +0.00%

Source: Anchoria AM Research, FMDQ OTC 

Commodities

Brent Crude Oil and WTI Crude Oil fell by 0.32% and 0.45% to close at $70.62 and $61.66 per barrel respectively despite geopolitical tensions between the United States and Iran. The fall in the crude oil price was due to uncertainty surrounding global trade as tension between US and China continues. 

Fixed Income

Bond: FGN

The Bond Market closed on a bullish note last week as average yields fell by 12bps to close the week at 14.06% following the news of re-appointment of the CBN governor for another five-year term. Yield across all maturities fell with the exception of the longest tenor bond (2049) which rose by 3bps. Notable last week were activities on 2023, 2034 and 2027 bonds with yield declining by 62bps, 41bps and 32bps respectively.

We expect the bullish to continue in the bond space as market participants anticipate decline in rate of short-term instruments at the auction.

Secondary Market

Proshare Nigeria Pvt. Ltd.

Source: Anchoria AM Research, FMDQ OTC 

Treasury Bills

The secondary treasury bills market closed on a bullish note last week due a relatively buoyant liquidity. Average yield fell by 21bps to close at 12.91% from 13.13% in previous week.

During the week, the CBN renewed its liquidity mopping activities with spot rate on OMO issued falling across tenors.

Secondary Market

Proshare Nigeria Pvt. Ltd.

Source: Anchoria AM Research, FMDQ OTC 

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