Market Update: Strong forex demand, interest rate down
Liquidity in the Money Market remains thin at the Investors and Exporters (I&E) window as demand for FX stayed strong despite the relatively low supply.
US dollar closed the session at N385.88, up from the week’s opening of N385.77.
The external reserves closed the week up at $35.788 billion from $35.704bn in the previous week. We expect the dollar to naira to remain bid in the coming week given the strong demand for foreign currency by endusers.
The Central Bank of Nigeria (CBN) is scheduled to conduct its usual Retail SMIS auction today, Friday, September 11, 2020.
On Thursday, the CBN refunded the NGN for the unsuccessful bids at the last retail auction to the banks ahead of today’s session.
Overnight rates have averaged 2.24 percent so far this week, down from 7.89 percent in the previous week due to increased money market liquidity from net treasury bills maturities totaling N285bn this week.
Local banks were buyers of OMO Treasury Bills this week as a result of the low overnight rates. Discount
rates declined by an average of 35 bps across all tenors week-on-week.
At the NTB auction held on Wednesday, the DMO offered and allotted a total of N128.059 billion across the 91,
182 and 364-day bills. The three bills were oversubscribed and the auction was stronger than expected.
An OMO auction was held on Thursday where a total of N70bn across the 75-day, 180-day and 355-day bills was offered and sold. Marginal rates matched expectations.
FGN bonds were better bid across the curve for the most part this week with local investors focusing particularly on shorter tenor bonds. Consequently, yields on the short end (22s-25s) dropped 90 bps on average week-on-week while yields on bonds in the belly and long end of the curve (26s-50s) dropped just 12bps on average.
-Source: Citibank Nigeria