The month of August ended with the bond market closing on a bearish note just as continued selloffs pushed yields higher by c.8bps across the curve . Operators therefore envisage a bearish outlook for the month of September amid continued weakness in Emerging Market assets and expected increase in FGN Borrowings. The most selloffs on the 2026s which was sold off to 15.26% was witnessed in the past month.
Treasury Bills
Barring an OMO auction by the Central Bank of Nigeria this Monday, yields are still expected to moderate slightly, due to the significant inflows anticipated from FAAC payments to state and Local Governments. However, most market players are expected to adopt a wait and see approach, while those with pressure to invest are expected to still maintain the short end play for now.
Meanwhile, yields in the T-bills market moderated by c.20bps, due to the buoyant level of liquidity in the system, on the back of the OMO maturities and Retail FX refunds in the previous session. Demand is however constrained to the shorter end of the curve by market players, with only few real money client orders seen on the mid tenor bills (Feb & Mar), which were bought down to the last PMA levels (12.30%), and no further.
Money Market
Rates are expected to decline further this week barring any real liquidity management action by the CBN as a result of inflows from recent FAAC payments. However, the Open Buy Back and Over Night rates fell sharply to 6.00% and 6.83% respectively in Friday’s session as a result of the significant increase in net system liquidity from the previous session, with opening figures published at c.N780bn from c.N105bn previously. This is however estimated to have declined to c.N430bn as at COB Friday, due to estimated outflows for retail FX funding by banks.
FX Market
Last week, the Naira/USD exchange rate remained stable at the interbank, closing at N306.15/$. At the I&E FX window, a total of $425.98mn was traded in 472 deals, with rates ranging between N355.00/$ – N364.00/$. However, the NAFEX reference rate depreciated by 0.09% to N362.32/$ from N363.06/$ previously. At the parallel market, the cash and transfer rates appreciated by 10k and 50k to N359.30/$ and N361.50/$
respectively.
