Fixed income, currencies markets record turnover decline

by Iheanyi Nwachukwu

March 15, 2018 | 12:34 am
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Nigeria’s Fixed Income and Currencies (FIC) markets recorded turnover decline in the month of January 2018 to N11.71trillion; a 1.28percent decrease (N150billion), from the value recorded in December 2017. Though, the record turnover represents a 28.17percent increase (N2.57trillion) year-on-year (YoY).

Activities in the Treasury Bills (T.bills) market accounted for 39.24percent of market turnover (35.26percent in December 2017), while the Foreign Exchange (FX) market accounted for 37.50percent of the total turnover (33.63percent in December 2017).

The Money Market (Repurchase Agreements (Repos)/Buy-Backs & Unsecured Placements/Takings) accounted for 16.90 percent of market turnover (24.31 percent in December 2017).

These three (3) segments combined contributed 93.64percent to the total turnover in the FIC markets

FX Market

Transactions in the FX market settled at $14.01billion in January 2018, an increase of 8.91 percent ($1.15 billion) when compared with the value recorded in December 2017 ($12.86 billion).

In the month under review, the Naira appreciated slightly at the Investors’ & Exporters’ (I&E) FX Window closing at $/N360 (from $/N360.33 as at December 29, 2017) whilst also trading at a discount to the parallel market which closed at $/N364 (from $/N363 as at January 2, 2018).

The CBN Official Spot rate appreciated slightly, gaining N0.30 to close at $/N305.70 (from $/N306 as at December 29, 2017).

Total value traded at the I&E FX Window in January 2018 settled at $5.25billion, an increase of 36.87percent ($1.41billion) relative to the value recorded in Dec. 2017 ($3.87billion). Total value traded at the I&E FX Window since inception (April 21, 2017) stands at $31.46billion.

Inter-Member trades recorded $1.10billion in January 2018, an increase of 11.67% ($0.11billion) relative to the trades recorded in December 2017 ($0.99billion), and a 71.66percent increase YoY ($0.46billion).

Member-Client trades stood at $8.72billion, an increase of 4.72percent from the previous month ($0.39billion) and a 119.85percent increase YoY ($4.76billion).

Member-CBN trades recorded $4.18bn in January 2018 ($3.54billion in Dec. 2017), representing an increase of 17.98percent MoM ($0.64billion) and a 577.58percent increase YoY ($3.56billion), a likely effect of the Secondary Market Intervention Sales (SMIS) introduced by the CBN in February 2017.

The 18th Naira-settled OTC FX Futures contract, NGUS JAN 31, 2018, worth $321.60million, matured and settled in January, whilst a new 12-month contract – NGUS JAN 30, 2019 – for $1.00bn, was introduced by the CBN at $/N362.27.

Fixed Income Market (T.bills and FGN5 bonds)

Turnover in the Fixed Income market for the month under review settled at N5.33trillion, a 7.16percent increase MoM (N360billion). Transactions in the T.bills market accounted for 86.11percent of the overall Fixed Income market, an increase from the 84percent recorded in December 2017.

Outstanding T.bills at the end of the month stood at N11.47trillion (N10.60trillion in December 2017), an increase of 8.21percent month-on-month (MoM) (N870billion). FGN bonds outstanding value also increased by 0.96percent MoM (N8billion) to close at N7.64trillion, from N7.57trillion in December 2017.

Trading intensity in the Fixed Income market for the month under review settled at 0.40 and 0.10 for T.bills and FGN bonds, respectively, from 0.38 and 0.11 recorded the previous month respectively. T.bills between the six (6) and twelve (12) months maturity buckets became the most actively traded, accounting for a turnover of N2.52trillion in January 2018.

Short-term yields on the sovereign yield curve decreased by an average of 0.89 basis points (bps) and yields in the medium- and long-term spectrum lost an average of 0.68bps & 70.39bps respectively.

The spread between 10-year and 3-month benchmark yields closed negative at 0.49bps for January 2018 (0.01bps in December 2017), as yields dropped in January 2018 following the redemption of T.bills that matured in December 2017 by the Debt Management Office Money Market (Repos/Buy-Backs and Unsecured Placements/Takings).

Activities in the secured Money Market (i.e. Repos/Buy-Backs) settled at N1.86trillion in January 2018 32.23percent, N88billion less than the value recorded in December 2017 (N2.74trillion).

YoY, turnover on Repos/Buy-Backs recorded a 4.06percent (N7billion) increase from the value recorded in Jan. 2017 (N1.79trillion). Unsecured Placements/Takings closed the month at a turnover of N120.61billion, a 14.69percent decrease (N20.76billion) from the figure recorded in December 2017 (N141.37bn) and a 49.65percent decrease (N118.93billion) on YoY basis (N239.54billion as at January 2017).

Average O/N8 NIBOR for the period under review stood at 11.24percent (8.56percent in December 2017), indicating a fall in inter-bank liquidity.

Market Surveillance

The number of executed trades captured on the E-Bond Trading System in January 2018 amounted to 17,041 as against 16,307 recorded in December 2017.

Executed T.bills trades increased by 4.97percent (725) while FGN bonds increased by 1.79percent.

Iheanyi Nwachukwu

by Iheanyi Nwachukwu

March 15, 2018 | 12:34 am
  |     |     |   Start Conversation

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