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Market update

Money Market Wrap UP: Inflation rising, yields falling as liquidity surges

By on October 16, 2020 0 72 Views

Inflation: Nigeria’s CPI y-o-y rose to 13.71 percent in August up from the 13.22 percent print in August. This was higher than expectations and represents the 13th straight month of increases in the rate.

The hike was driven largely by rising food prices itself driven by the border closure and FX shortages.
Overnight rates stayed low this week – averaging 3.37 percent – despite funding for a retail auction on Friday last
week and a CRR debit. Money market liquidity was further boosted by net OMO maturities totaling N320 billion on
Thursday.

T-bills: With overnight rates remaining depressed this week, local banks continued to buy treasury bills
(NTBs and OMO T-bills) throughout the week prompting a 55 bps average decline in discount rates across
board.

This demand was reflected at the NTB auction held on Wednesday where the DMO offered and allotted
a total of N124.88 billion across the 91, 182 and 364-day bills from strong total demand of N618.09bn.

READ ALSO: Air traffic at European major hubs down 80% in September

The three bills were oversubscribed and marginal rates beat forecasts.
An OMO auction was held on Thursday where a total of N60 billion across the 110-day, 180-day and 362-day bills
was offered and sold. The auction was oversubscribed as well but marginal rates were in line with
expectations.

Bonds: In the same vein, locals continued to buy FGN bonds at the start of the week and the bullish
sentiments accelerated on Thursday following Wednesday’s strong NTB auction.

The buying interests remained most significant in the 6-10 year tenor segments of the bond curve. Consequently, yields on the 22s-25s declined 50 bps on average week-on-week, yields on the 26s-29s declined 105 bps, while yields on the longer tenors (34s-50s) declined 65 bps.

~ Citibank Nigeria

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