Bearish theme governs market as players seek clarity going into 2021

By Charles Abuede

• Naira down N3‭ ‬w/w as uncertainty hovers around‭ ‬forward rates fuelling bearish market sentiments

The fixed income market trailed in a bearish tone from the prior week with major sell-offs observed in the Bond and OMO-bills markets respectively. Thus, the average yield in the fixed income market rose to 2.1 per cent from 1.9 per cent in the prior week.

Also, sentiments in the NT-bills market were mixed which saw investors cherry-picking bills at the head to the belly of the NT-bill market, while profit-taking held sway at the tail of the curve following worse than expected spot rate for the 364-day bill at the week’s Primary Market Auction (PMA).

Following from that the average yield in the NT-bills market eased by five basis points week-on-week to settle at 0.4 per cent from 0.5 per cent in the prior week.

On the flip side, the OMO-bills market closed bearish following sell-offs at the medium to the long end of the curve, while major bids at the short end of the curve could not offset the pessimism.

Consequently, the average yield at the OMO-bills market soared for the week to 0.5 per cent from 0.4 per cent. The Central Bank of Nigeria (CBN), in its scheduled Primary Market Auction (PMA), rolled over maturing NT-bills worth N7 billion across the 91-DTM at 0.0480 per cent (prev. 0.0100 per cent), 182-DTM at 0.5000 per cent (prev. 0.0600 per cent) and 364-DTM at 0.1390 per cent (prev. 0.3200 per cent) for the 364-DTM.

Average bid-to-cover ratio for the auction stood at 17.4x as investors scurried for the sparse bills offered in light of the prevailing robust liquidity witnessed in the market.

Moving on, as averseness intensified in the bond market, investors booked profit across the curve with market direction remaining uncertain in light of the CBN’s introduction of special bills and the better-than-expected marginal rates at the bond PMA last week.

Thus, money market rates remain in single digits, albeit spiked following settlement obligations following PMAs across the NT-bills, OMO-bills, and the Bond market. The Overnight and Open Buy Back closed at 4.5 per cent and 4.5 per cent from 0.88 per cent and 0.5 per cent respectively in the prior week. Consequently, the average bond yield elevated by 62 basis points to 5.3 per cent from 4.7 per cent at the close of trading in the prior week.

Meanwhile, the Debt Management Office (DMO) in its final PMA for the year sold bonds worth N30 billion of N60 billion offered across the 12.50 per cent FGN MAR 2035 and the 9.80 per cent FGN JUL 2045 papers.

However, bid range in the PMA widened as investors sought for more yields, consequently, the DMO sold the 12.50 per cent FGN MAR 2035 and the 9.80 per cent FGN JUL 2045 papers at 6.95 per cent (prev. 5.00 per cent) and 7.00 per cent (prev. 5.79 per cent) respectively.

And in the foreign exchange market, the naira weakened at the street market, closing at N477 to the dollar from N474 in the previous week. However, market turnover spiked by 6.8 per cent in the Investors & Exporters Window (I&EW) to a weekly average of $172.0 million as against the $161.4 million in the past week. Nevertheless, the naira remained flat in the I&EW to close at N394 against the dollar.