BY BUSAYO SAMUEL
Turnover in the Fixed Income and Currency markets in September 2021 was N24.03trillion, representing a significant increase of 94.89 percent (N11.70trn) month-on-month (MoM) and 70.79 percent (N9.96trn) year-on-year (YoY) from turnover in August 2021 and September 2020 respectively.
Foreign Exchange and Money Market transactions remained the highest drivers of turnover, jointly accounting for 54.22 percent of the total FIC markets turnover in September 2021.
Open Market Operation and Central Bank of Nigeria’s Special Bills’ contributions to FIC market turnover increased by 12.52 percentage points to 23.96 percent.
Total FX market turnover in September 2021 was $17.08billion (N7.05trn), representing a MoM increase of 87.08 percent ($7.95bn) from the turnover recorded in August 2021 ($9.13bn).
The month-on-month increase in total FX market turnover was jointly driven by the 68.61 percent ($3.33bn) and 108.02 percent ($4.62bn) MoM increase in FX Spot and FX Derivatives turnover respectively in September 2021.
The MoM increase in FX derivatives turnover was driven by MoM increase in turnover across all product types which include FX Swaps which grew by 34.32 percent, FX Forwards, 54.75 percent; FX Futures recorded a significant growth of 840.07 percent while Other Derivatives jumped by 128.88 percent. Consequently, the contribution of FX derivatives to total FX market turnover increased by 5.25 percentage points to 52.12 percent in September 2021.
In the OTC FX Futures market, the near month contracts (NGUS SEP 29, 2021) expired and open positions with a total notional value (NV) of $0.34billion were settled while a far month (60M4) contract, NGUS SEP 30, 2026 was introduced at a Futures price of $/N614.32.
The total NV of open OTC FX Futures contracts as at September 30, 2021 stood at circa $4.92billion representing a MoM increase of 27.46 percent ($1.06bn) from its value as at August 31, 2021.
“Total turnover in the Money Market segment increased MoM by 31.38 percent (N1.43trn) to N5.98trillion in September 2021. This was solely driven by the MoM increase in Repos/Buybacks by 33.18 percent (N1.47trn) to N5.90trillion in September 2021
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In the FX Market, the Naira depreciated against the US Dollar, losing 0.31 percent ($/N1.26) to close at an average of $/N412.75 in September 2021 from $/N411.49 recorded in August 2021.
Further, the Naira traded within a range of $/N410.67 – $/N414.90 in September 2021 compared to $/N410.80 – $/N412.00 recorded in August 2021.
In the primary markets, average discount rates for the 91-day and 182-day T.bills remained flat at 2.50 percent and 3.50 percent respectively, whilst the average discount rate for 364-day T.bills increased by 0.22 ppts, to 7.30 percent in September 2021 from 7.08 percent recorded in August 2021.
Similarly, the average discount rates for CBN OMO7 bills for comparable tenors 8 remained flat at a range of 7.00 percent to 10.10 percent in September 2021.
The 10-year Bond coupon rate remained constant at 11.60 percent while the 20 years and 30 years FGN10 Bond issuances declined by an average of 0.40ppts to close at a range of 11.60 percent to 13.00 percent from 11.60 percent to 12.80 percent recorded in August 2021.
In September 2021, OMO bills was the highest contributor to FI market turnover, driven by the MoM increase in its turnover by 418.92 percent (N3.10trn) and resulting in an increase in OMO bills trading intensity by 134bps to 1.63 from 0.29 in August 2021. This may be attributed to the increase in OMO bills issuances by the CBN in the primary market.
Similarly, turnover across other fixed income products such as FGN Bonds, T.bills, CBN Special Bills and Others also increased MoM in September 2021.
In September 2021, 1 month to 3 months tenor T.bills were the most traded sovereign debt securities, accounting for 55.44 percent (N2.87trn) of the total sovereign fixed income market turnover, while FGN Bonds with term-to-maturity of 20 year or higher were the most actively traded long term sovereign debt securities, accounting for 21.14 percent (N1.10trn) of the total sovereign fixed income market turnover.
Also in September 2021, the yield spread between the 3M and 30Y sovereign debt securities decreased by 0.96ppts to 8.65ppts in September 2021, indicating a flattening of the sovereign yield curve.
Despite the moderation in headline inflation, real (inflation adjusted) yields remained negative across the yield curve in September 2021.
Total turnover in the Money Market segment increased MoM by 31.38 percent (N1.43trn) to N5.98trillion in September 2021. This was solely driven by the MoM increase in Repos/Buybacks by 33.18 percent (N1.47trn) to N5.90trillion in September 2021.
The average OBB rate (secured lending rate) and O/N rate decreased by 1.10ppts and 0.86ppts respectively, to close at an average of 12.18 percent and 12.87 percent in September 2021.
The total number of executed trades14 reported on the Bloomberg E Bond Trading System increased MoM by 1.29 percent (56) to 4,381 in September 2021, with an average trade size of N0.33trillion compared to N0.20trn in August 2021.
The increased market activity was driven by the MoM increase in the number of trades for OMO bills, CBN Special Bills and FGN Bonds in September 2021.
