Ahead N141.3bn PMA, weak demand to drive T-Bills, bonds seen healthy

BY CHARLES ABUEDE

Although currency analysts expect the naira to trade on a calm note and maintain the current band, it was a divergent performance for the currency across the various segments of the market last week as the local currency gained strength against the dollar by N1 week on week at the parallel market at N587 to the dollar, while it weakened N0.05 week on week at N416.67 to the greenback at the investors’ and exporters’ window.

As a result, the market activities level at the I&E window declined as total market turnover fell 33.2 percent week on week to $489.3 million. And at the FMDQ OTC FX Contract Market, the activity level was slightly upbeat as the total value of open contracts rose 0.1 percent to $4.1 billion.

And on the money market, it was observed that system liquidity stood at N180.7 billion throughout the week after it opened lower with the Open Repo at 7 percent while the overnight rate opened at 7.3 percent respectively, from last week’s 10.2 percent and 10.7 percent apiece.

At the close of the week, the Overnight (O/N) rate increased by 0.50 percent to close at 6.25 percent and the Open Repo (OPR) rate also increased by 0.50 percent to close at 5.75 percent in that order.

Heading into the Nigerian Treasury Bills secondary market, it was relatively quiet as the average benchmark trended 14 basis points higher week on week to 3.5 percent as sell-offs were witnessed most evidently on the 91-day instruments with the rates leaping further to 2.9 percent. The 182-day instrument also trended higher to 3.2 percent while the 364-day instrument declined 6 basis points to 4.4 percent.

Meanwhile, at the end of the week, the market closed on a flat note with the average yield across the curve remaining unchanged at 3.35 percent. Thus, the average yields across short-term, medium-term, and long-term maturities remained unchanged at 2.69 percent, 3.05 percent, and 3.92 percent, respectively.

At the OMO bills market, the average yield across the curve closed flat at 3.42 percent. Average yields across short-term, medium-term, and long-term maturities remained unchanged at 3.01 percent, 3.37 percent, and 3.93 percent, respectively. However, this week, CBN is expected to guide rates through its intervention in the maturing OMO instruments worth N50 billion and N141.3 billion in the primary market auction.

Elsewhere in the bond market, the FGN bonds secondary market closed on a mildly negative note on Friday as the average bond yield across the curve cleared higher by 8 basis points to close at 10.94 percent from 10.86 percent on the previous day. Average yields across short tenor, medium tenor, and long tenor of the curve expanded by 2 basis points, 20 basis points, and 2 basis points, respectively.

Consequently, the 23-MAR-2025 maturity bond was the best performer with a decrease in the yield of 20 basis points, while the 26-APR-2029 maturity bond was the worst performer with an increase in the yield of 37 basis points.

Meanwhile, during the week, the Debt Management Office offered up to N50 billion worth of 2-year and 3-year FGN Savings Bonds due April 2024 and April 2025 at the interest rate of 7.338 percent per annum and 8.338 percent per annum, respectively. The bond auction closed on April 8, with settlement on April 13, 2022. The interest will be paid quarterly, with a redemption bullet repayment on the date of maturity.

Also, the DMO has released its FGN Bonds Issuance Calendar for the second quarter of 2022, deepening the sovereign curve by introducing a new 10-year FGN bond. The DMO is expected to offer bonds worth between N630 billion and N720 billion during the quarter through the re-opening of 7-year (N210-N240 billion), the new issue of 10-year (N210-N240 billion), and the re-opening of 20-year (N210-N240 billion) tenors.