Funding Rates Crash to Single Digits as OMO Inflows Bolster System Liquidity

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Bonds

The bond market traded on a very quiet note with yields rising higher at the opening of the session, following the relatively higher clearing rates at the previous day’s auction. Yields however moderated slightly during the trading session as some client demand came into the market especially on the 2021 and 2027 bonds. Average bond yields however closed higher by c.9bps d/d, as market players stayed relatively cautious, with bids maintained at and above auction levels. We anticipate a slight decline in yields tomorrow, with some client demand expected to take them slightly below current levels.

Treasury Bills

The T-bills market traded on a relatively flat note as market players opted for the OMO auction by the CBN. The CBN sold a total of N125m 111-day and N113bn 231-day bills, with rates maintained at 11.05% and 12.15% respectively. We expect yields to trend slightly lower tomorrow due to improved system liquidity.

Money Market

The OBB and OVN rates crashed to 7.75% and 8.42% respectively. This was on the back of inflows from OMO maturities (c.267bn) which helped offset outflows for today’s OMO auction sales (N113bn) by the CBN. System liquidity is consequently estimated to close at c.N165bn positive from c.N10bn opening today. We expect rates to remain relatively moderated as we expect inflows from FAAC and Retail FX refunds to keep system liquidity buoyant, despite expected outflows for retail FX sales and Bond auction debits.

FX Market

The Interbank rate remained stable at its previous rate of N305.90/$. The I&E FX Rate depreciated further by 0.06% to N361.65/$. Rates in the Cash and Transfer Market also depreciated further by 50k to N364.50/$ and N366.50/$ respectively.

Eurobonds:

The NGERIA Sovereigns maintained its firm bullish recovery with yields compressing by c.7bps across the curve. This was as offshore clients relaxed their risk off stance following minutes of the previous day’s FED Minutes indicating a softer stance on inflation and a consequent dip in USTs, with the 10yr slightly below the 3% mark. Investors were mostly bullish on the 2032s and 2038s which gained +0.60pt and +0.85pt respectively.

Investors were also bullish on the NGERIA Corps, with most tickers posting significant price gains whilst being mostly bid during the session. Investors were mostly bullish on the FBNNL 21s and FIDBAN 22s, which gained +0.30pt and +0.40pt respectively. The Access 21s, Zenith 22s and UBANL 22s were also well bided during the session.