Investment activities in the Fixed Income and Currencies market on the platform of the FMDQ Exchange recorded a month on month growth of 18.31 percent or N2.82 trillion in turnover in June while on year on year basis growth increased by N2.89 trillion or 18.87 percent. Money Market and FX transactions dominated secondary market activity in the review month, with both jointly accounting for 59.51 percent of the total secondary market turnover. BAMIDELE FAMOOFO reports.
Additional N2.82 trillion was splashed on short to medium term yielding instruments in the Fixed Income and Currencies market in June 2022, as gross turnover increased to N18.20 trillion as against N15.38 trillion recorded in May. Investment in the market also remained attractive in a longer term as turnover increased N2.89 trillion year-on-year as at June 30, 2022 compared to the figure in the same period in 2021.
In the primary segment of the market (Sovereign Securities), the Debt Management Office sold treasury bills 9T.bills) valued at N544.87bn across its auctions in June 2022. It exceeded the amount offered (N383.29bn) indicating the sustained demand for T.bills, and also represents a 75.00 percent (N233.52bn) MoM increase in T.bills sold relative to May 2022 (N311.35bn).
Similarly, the DMO reopened two 10 years and one 20 years FGN Bond issues in June 2022; selling FGN Bonds worth N226.12bn (exceeding the total amount of FGN Bonds offered by N1.12bn). However, total value of FGN Bond issued decreased MoM by 40.24 percent (N152.29bn) relative to May 2022 figures. In June 2022, the CBN issued OMO bills worth N40.00bn to banks and eligible investors.
Still in the primary market (Non-Sovereign Securities), total value of corporate bonds listed on FMDQ Exchange in June 2022 stood at N38.00bn representing a 280.00 percent (N28.00bn) MoM increase from the value of corporate bonds listed in May 2022. Corporate bond listing emanated from two issuers in the Quick Service Restaurant and Agricultural sectors.
Similarly, total value of CPs quoted on FMDQ Exchange in June 2022 was N40.85bn, representing a MoM decrease of 75.46 percent (N125.63bn) from the value of CPs quoted in May 2022. Quoted CPs were issued by institutions from various sectors including Financial Services (2), Consumer Goods(2),Commodities Trading(2),Agriculture(1) and Real Estate(1),sectors. In June 2022, total value of outstanding corporate bonds and CPs increased MoM by 3.49 percent (N35.10bn) and 7.06 percent (N34.19bn) to N1, 039.70bn and N518.80bn respectively.
“In the FX Market, the Naira depreciated against the US Dollar, with the exchange rate ($/N) increasing by 0.44 percent ($/N1.83) to close at an average of $/N420.98 in June 2022 from $/N419.15 recorded in May 2022”
In the secondary market, total turnover of all products issued stood at N18.20trn, representing a month on month increase of 18.31 percent (2.82trn) and a YoY increase of 18.87 percent (about N2.89trn), respectively. Money market and foreign exchange transactions dominated secondary market activity in June 2022, with both jointly accounting for 59.51 percent of the total secondary market turnover. Total spot market turnover for all products traded in the secondary market was N16.19trn in June 2022, representing a MoM increase of 20.10 percent (N2.71trn) from the turnover recorded in May 2022.
The MoM increase in total spot market turnover was driven mainly by the 64.23 percent ( about N2.28trn) increase in money market (MM) turnover, as well as the 8.30 percent (N0.23trn)and 2.79 percent (N0.20trn)increases in FX and FI market segments turnover, respectively. The increase in M/M turnover was driven mainly by the MoM increase in Repos/Buy-Backs by 62.79 percent (about N2.19trn), while the MoM uptick in FI market segment turnover was driven by MoM increases in T.Bills, CBN Special Bills and Other Bonds turnover by a combined 25.68 percent (about N1.03trn), despite the36.99 percent (about N0.80trn) and 2.84 percent (about N0.03trn) decrease in OMO bills and FGN Bonds respectively.
Spot FX Market
FX spot market turnover was N2.99trn ($7.10bn) in June 2022, representing a MoM increase of 8.30 percent (about N0.23trn) from the turnover recorded in May 2022 (about N2.76trn).
In the FX Market, the Naira depreciated against the US Dollar, with the exchange rate ($/N) increasing by 0.44 percent ($/N1.83) to close at an average of $/N420.98 in June 2022 from $/N419.15 recorded in May 2022.
Further, exchange rate volatility increased in June 2022 compared to May 2022 as the Naira traded within an exchange rate range of $/N419.00-$/N425.50 in June 2022 compared to $/N417.00-$/N421.50 recorded in May 2022.
Spot Fixed Income Market
Fixed income market turnover was N7.37trn in June 2022, representing a MoM increase of 2.79 percent (N0.20trn) from the turnover recorded in May 2022 (N7.17trn). The MoM increase was driven by the increase in T.bills and CBN Special Bills turnover by N1.07trn, and offsetting the MoM decrease in turnover for OMO Bills and FGN Bonds. CBN Special Bills were the most traded FI securities, accounting for 45.05 percent of the total FI turnover in June 2022.
T.bills within the 6M 12M tenor range were the most traded sovereign debt securities, accounting for 32.31 percent (N0.86trn) of turnover for sovereign debt securities, while FGN Bonds with term-to-maturity of 12M–3Y were the most traded long- term sovereign debt securities, accounting for 6.37 percent (N0.17trn)of total turnover for sovereign debt securities. In June 2022, the yield spread between the 3M and 30Y sovereign debt securities decreased by 2.59ppts to 9.11ppts, indicating a flattening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in June 2022.
Spot Market – (Money Market)
Total turnover in the Money Market segment increased MoM by 64.26 percent (N2.28trn) to N5.83trn in June 2022.The MoM increase was driven by the 143.04 percent (N0.09trn) and 62.79 percent (N2.19trn) increase in Unsecured Placement/Takings and Repos/Buy-backs turnover, respectively. The average O/N rate and OPR rate (secured lending rate) increased by 1.87ppts and 1.93ppts respectively, to close at an average of 11.60 percent and 11.28 percent in June 2022.
“A far month (60M) contract, NGUS JUN 30, 2027 was introduced at a Futures rate of $/N632.60 representing the first increase in the far month contract for OTC FX Futures after being retained at $/N626.97 for six consecutive months”
Derivatives Market
Total turnover in the FX derivatives market segment was N2.01trn ($4.79bn), representing a MoM increase of 5.51 percent (N0.10trn) in June 2022. The MoM increase in the FX derivatives turnover was driven by the 162.85 percent (N0.17trn) increase in FX Swaps, offsetting the 58.54 percent (N0.06trn) and 4.31 percent (N0.01trn) decrease in FX Futures and FX Forwards, respectively.
Naira-settled OTC FX Futures Market
In the OTC FX Futures market, the near month contract1 (NGUS JUN 29, 2022) expired and open positions with a total notional value (NV) of$0.31bn were settled. A far month (60M) contract, NGUS JUN 30, 2027 was introduced at a Futures rate of $/N632.60 representing the first increase in the far month contract for OTC FX Futures after being retained at $/N626.97 for six consecutive months.
The total NV of open OTC FX Futures contracts as at June30,2022,stood at circa $3.77bn representing a MoM increase of 0.27 percent($0.01bn) and a YoY decrease of 11.29 percent ($0.48bn)from its value as at May31,2022 and June30,2021,respectively. The total NV of OTC FX Futures Contracts traded decreased by 61.33 percent ($0.42bn) to $0.26bn in June 2022 from $0.68bn recorded in May 2022.
In June 2022, the hedge concentration in the OTC FX Futures Market was within the7–12M maturity bucket, accounting for 80.10 percent ($0.21bn) of the total traded values across 13 of the 25 deals conducted in the period under review.
The NV of OTC FX Futures Contracts traded across short-dated contracts (0–12M) increased by 44.39 percent ($0.07bn) to $0.22bn while the NV of OTC FX Futures Contracts traded across long-dated contracts (13–60M) decreased by 92.47 percent ($0.49bn) to $0.04bn. Average OTC FX Futures Contract rates and Deliverable Forwards rates in June 2022 increased across all tenor buckets when compared to the previous month of May. The Average OTC FX Futures Contract rates on the 55- 60M bucket recorded the highest depreciation. Likewise, the highest depreciation in the Deliverable Forwards market was recorded on the farther term-12Mcontract.
