Bears lift yields across markets to 4% on outcome of MPC January meeting

By Charles Abuede

• Naira loses confidence by N3.2 w/w in street fight with greenback

• High anticipation from market analysts for selloffs to linger across board as sentiments remain pessimistic.

At the wrap up of the final trading week of January, bearish sentiment dominated the Nigerian Fixed Income market stoking a rise in the average yield across markets to 4.0 per cent from the previous week of 2.8 per cent.

Treasury Bills market

At the NT-bills market, which opened the week bearish, even though most trades settled flat as investors anticipated the conclusion of the first MPC meeting of the year on Tuesday, as well as the NT-bill Primary Market Auction (PMA) on Wednesday. At the PMA, investors demanded higher yields to hold government security which settled stop rates across the 91-Day at 0.55 per cent from 0.50 per cent, 182-Day at 1.30 per cent from 1.00 per cent and 364-Day at 2.00 per cent from 1.50 per cent. Following the public sale, investors quickly sold-off their assets causing the yields in the secondary market to hit a 3-month high of 1.1 per cent.

On the other hand, the selloffs opened opportunities for investors to position in tickers at the belly of the curve, thus moderating yields slightly on Friday. By and large, the average NT-bills yield rose from 0.5 per cent to 1.1 per cent from the prior week’s close.

The OMO market

In another development in the market, the OMO market followed a similar trajectory as the bears were unrelenting save for Thursday as the CBN rolled over 97.0 per cent of maturing bills worth N150 billion via OMO sales. As a result, the average yields in the OMO-bill market spiked by 74 basis points to 1.7 per cent from 0.9 per cent from the last close of the previous week.

The Bond market

As estimated by market analysts at the start of the week for a net inflow that could balance liquidity in the market, there was an inflow of N239.8 billion from the FGN Bond coupon payment and maturing OMO bill. However, funding rates firmed up week on week by 50 basis points for the Open Buy Back (10.5 per cent) and Over Night rate (11.0 per cent) suggesting a tighter liquidity environment.

Meanwhile, the bears held sway in the Bond market last week as they sold off instruments across the tickers. Notably, yields expanded across the long (+131bps), short (+100bps) and intermediate (+61bps) segments. As a result, the average bond yield pointed higher by 97 basis points to settle at 8.1 per cent from 7.1 per cent by week on week basis.

Foreign Exchange market

In the FX market, the Naira weakened at the parallel market to N478.2 to the greenback from N475 per dollar in the previous week. Further afield, market turnover eased by 14.7 per cent from the preceding week in the Investors’ & Exporters’ Window (I&EW) to a weekly average of $216.8 million as against the average of $306.9 million in the prior week. The Naira calmed down in the I&E Window to close at an average of N394.2 per dollar as against N393.9 to a dollar in the prior week. However, most market participants maintained bids between N388 and N395 per dollar during the week.