FAAC inflows to supress Tbills yield this week
July 29, 2019860 views0 comments
In anticipation of the Federal Accounts Allocation Committee (FAAC) inflows this week, market traders are expecting a slight compression in the T-bills yield curve.
Rates in the money market rose higher by 7 percentage points as outflows for the federal government’s bond auction settlement pressured system liquidity lower.
The open buy back (OBB) and overnight (OVN) rates consequently ended the week at 21.86 percent and 23.21 percent, with system liquidity estimated to close at N90 billion negative.
At the interbank, the naira/dollar rate remained stable at N306.90/ $ (Spot) and N357.70/$ (SMIS). The NAFEX closing rate at the I&E window rose further by 7k to N361.97/$, whilst the market turnover rose by 70% to $295m.
At the parallel market, the cash and transfer rates remained stable at N357.70 to 1 dollar and N362.00 to 1 dollar respectively.
The exchange rates are expected to remain elevated opening the new week, as banks fund for a weekly wholesale FX auction by the CBN, Zedcrest Capital analysts noted at the weekend.
The federal government bond market traded on a relatively calm note, with yields marginally lower by 2 basis points following continued interests on the Short end of the curve.
The market however witnessed slightly improved offers on the mid to long end of the curve. Bond yields are thus expected to remain relatively stable in the near term, due to the depressed yields levels in the T-bills market.
Yields inched marginally higher by c.5bps in the T-bills market, as demand interest remained suppressed by the tighter system liquidity levels in the money market.
On eurobonds, yields trended higher in the NGERIA Sovereign space as some expectations for a more than a quarter point rate cut by the US FED faded, following the fairly positive US Q2 19 GDP results (2.1% actual vs 1.8% consensus).
Yields were consequently higher by c.7bps Friday, with the 47s and 49s the hardest hit.
The NGERIA Corps remained relatively stable, but with better sellers seen on the ETINL 24s, whilst the FIDBAN 22s remained mostly bid.