Bears set to play in FI markets in absence of major catalysts

BY CHARLES ABUEDE

The naira is not showing any sign of recovery and it seems bent on seeing the bottom of the valley in the street where many believe its real value is properly weighed up and measured. In the streets of Lagos and Port Harcourt that we sampled for how much naira you need to cough up for the dollar, word was that you should make sure you stuff your wallet with N609 if you want to get just a dollar; yes, for just a dollar!

So, in the street across Lagos and Port Harcourt the currency closed the week at N609 per dollar despite the bullish rally seen in the price of crude, which has seen OPEC+ raise Nigeria’s quota above 1.7 million barrels per day, but pressured on by the news of the new rates hike by the United States’ Federal Reserves by 50 basis points during the week.

On the other hand, there was an appreciation by N3.20 week on week to N415.8 per dollar from N419 per dollar in the previous week at the Investors’ and Exporters’ FX segment, buoyed by the news of the OPEC+ quota increase for the country, plus the relative stable mix of interventions by the CBN in the foreign exchange market in recent weeks.

Meanwhile, most market participants maintained bids of between N410 and N444 per dollar.

And then, at the close of the week, the Overnight (O/N) rate fell by 0.08 percent to close at 4.93 percent as against the last close of 5.01 percent, while the Open Repo (OPR) rate remained unchanged at 4.75 percent.

In the fixed income market, experts in the space say they expect the bearish sentiment, which ruled the past week, to continue in the bonds market, while muted activity may likely be seen in the Nigerian Treasury Bills Market ahead of the next primary market auction in May and in the absence of a market catalyst to drive activities.

Taking a snapshot of the weekly activity, the fixed income market traded largely bearish, with yields trending upwards in the bonds and Nigerian Treasury Bills spaces, while the OMO segment majorly saw bullish activities.

And looking at the week, the yields on benchmark bonds rose nine basis points on average, driven by sell-side action at the short-end of the market. In the same way, the Nigerian Treasury Bills saw selloffs at the centre of the curve and consequently, the average yield increased by 12 basis points. As a final point, in the OMO space yields declined three basis points on average, driven by buy-side activity at the short end of the market.

Furthermore, at the close of the week, the Nigerian Treasury Bills secondary market closed on a flat note with the average yield across the curve remaining unchanged at 3.82 percent. The average yields across short-term, medium-term, and long-term maturities remained unchanged at 3.15 percent, 3.56 percent, and 4.35 per cent, respectively.

In the OMO bills market, the average yield across the curve closed flat at 3.92 per cent. Average yields across short-term, medium-term and long-term maturities remained unchanged at three percent, 3.35 percent, and 4.96 percent, respectively.

Additionally, the CBN held an OMO auction on Thursday, selling bills worth N140 billion across the 110-day tenor at N10 billion, the 187-day tenor priced at N100 billion, and N30 billion for the 362-day tenor with the stop rates remaining unchanged at 7 percent, 8.50 percent, and 10.10 percent, respectively.

The auction was oversubscribed, indicating a subscription level of 630 percent indicating N315.06 billion. However, the demand was skewed towards long tenor maturity bills with bid-to-cover ratios settling at 4.39x for the 110-day tenor, 5.60x for the 187-day, and 7.17x for the 362-day tenor in that order.

And the FGN bonds secondary market closed the week on a mildly positive note as the average bond yield across the curve cleared lower by two basis points to close at 11.61 percent from 11.63 percent on the previous day. But the average yields across short and medium tenors of the curve declined by one basis point and seven basis points, respectively. Though, the average yield across the long tenor of the curve remained unchanged. At the end of the week, the 26-APR-2029 maturity bond was the best performer with a decrease in the yield of 15 basis points.