Fixed income, currency markets: Turnover hits new highs

by | April 19, 2018 12:55 am

The turnover in Nigeria’s Fixed Income and Currency (FIC) markets for the month of March amounted to N15.66trillion, representing 24.68percent or N3.10trillion increase from the value recorded in February and a 16.26percent or N2.19trillion increase year-on-year (YoY).

According to the FMDQ OTC Monthly, a report by the market development group of FMDQ OTC Securities Exchange (FMDQ), activities in the Treasury Bills (T.bills) market accounted for 35.69percent of market turnover (44.44percent in February), while the Foreign Exchange (FX) market accounted for 39.06percent of the total turnover (33.13percent in February).

The Money Market (Repurchase Agreements (Repos)/Buy-Backs and Unsecured Placements/Takings) accounted for 17.62percent of market turnover (16.90percent in February). These three segments collectively contributed circa 92.37percent to the total turnover in the Fixed Income and Currency markets in the review month.

Transactions in the FX market settled at $18.67billion (N6.12trilllion) in March, an increase of 44.59percent ($5.76billion) when compared with the value recorded in February ($12.92billion).

In the month under review, the Naira appreciated at the Investors’ & Exporters’ (I&E) FX Window closing the month of March at $/N360.20 (from $/N360.41 as at February 28, 2018) while also trading at a discount to the parallel market which closed at $/N362 (from $/N363 as at February 28, 2018). The CBN Official Spot rate appreciated slightly, gaining N0.25 to close at $/N305.65 (from $/N305.90 as at February 28, 2018).

Total value traded at the I&E FX Window in March settled at $6.06billion, an increase of 55.38percent ($2.16billion) relative to the value recorded in February ($3.90billion). This brings the total value traded year-to-date at the I&E FX Window to $15.21billion.

Inter-Member trades recorded $2billion in March, an increase of 47.15percent ($0.64billion) relative to the trades recorded in February ($1.36billion), and a 237.28percent ($1.40billion) increase YoY ($0.59million). Member-Client trades stood at $10.98billion, an increase of 47.50percent ($3.54billion) from the previous month and an 84.12percent ($5.02billion) increase YoY ($5.96billion).

Member-CBN trades recorded $5.70billion in March ($4.11billion in February), representing an increase of 38.48percent ($1.58billion) and a 277.17percent ($4.19billion) increase YoY ($1.51billion) as the effect of the Secondary Market Intervention Sales (SMIS) continued to boost activity in the FX Market.

The 21st Naira-settled OTC FX Futures contract, NGUS MAR 28, 2018, worth $437.52million, matured and settled in March, whilst a new 12-month contract – NGUS MAR 27, 2019 – for $1billion, was introduced by the CBN at $/N361.96.

Turnover in the Fixed Income market for the month under review settled at N6.74trillion, a 7.50percent increase (N0.47trillion) month-on-month (MoM). Transactions in the T.bills market accounted for 82.94percent of the overall Fixed Income Market, a decrease from the 89percent recorded in February.

Outstanding T.bills at the end of the month stood at N13.21trillion (N12.56trillion in February), an increase of 5.18percent (N0.65trillion); FGN bonds outstanding value also increased marginally to close at N7.82trillion, from N7.74trillion in February.

Trading intensity in the Fixed Income market for the month under review settled at 0.42 and 0.15 for T.bills and FGN bonds, respectively, from 0.44 and 0.09 recorded the previous month respectively. T.bills within the six (6) to twelve (12) month maturity bucket became the most actively traded, accounting for a turnover of N2.93trillion in March.

Short-and medium-term yields on the sovereign yield curve decreased by an average of 33 basis points (bps) and 11bps respectively while long-term yields gained an average of 0.13 bps. The spread between 10-year and 3-month benchmark yields closed negative at -1.22bps for March 2018 (-1.17bps in February) indicating an inverted yield curve.

Activities in the secured Money Market (i.e. Repos/Buy-Backs) settled at N2.62trillion in March, which was 29.19percent (N0.59trillion) higher than the value recorded in February (N2.03trillion). YoY, turnover on Repos/Buy-Backs recorded a 5.42percent (N0.13trillion) increase from the value recorded in March 2017 (N2.49trillion).

Unsecured Placements/Takings closed the month at a turnover of N135.92billion, a 44.98percent increase (N42.17billion) from the figure recorded in February (N93.75billion) and a 15.19percent increase (N17.92billion) on YoY basis (N118billion as at March 2017). Average O/N NIBOR for the period under review stood at 15.97percent (19.91percent in February), due to improved inter-bank liquidity.

The number of executed trades captured on the E-Bond Trading System in March amounted to 14,055 as against 16,325 recorded in February. Executed T.bills trades decreased by 18.78percent (2,639) to 11, 413 in March (14,052 in February) whilst FGN bonds increased by 16.23% (369) to 2,642 in March (2,273 in February).

Iheanyi Nwachukwu