A spate of calm is expected in the financial markets this week as corporate organisations close their books for the first half of the year Tuesday.
The demand pressure that created volatility in the markets during the past weeks will be subdued by the liquidity boost created by the maturity of T-bills worth N246.09 billion via the primary and secondary markets.
This will offset T-bills worth N88.86 billion to be auctioned by the Central Bank of Nigeria (CBN) via the primary market.
This consists of 91-day bills worth N10.00 billion, 182-day bills worth N20.00 billion and 364-day bills worth N58.86 billion.
Market watchers say they expect NIBOR decline while stop rates of the issuances would also fall on demand pressure amid anticipated liquidity boost.
Notwithstanding the expected calm in the markets occasioned by the liquidity boost, analysts at Cowry Asset Management predict a depreciation of the Naira against the US Dollar at the I&E FX window due to declining external reserves.
“In the new week, we expect the Naira to depreciate against the USD, especially at the Investors & Exporters Forex (I&E FX) Window amid declining external reserves”, the market research firm said in its Weekly Financial Market Report sent to NEXTMONEY.
The Naira appreciated against the USD in the past week at the I&E FX Window by 0.04% to close at N386.33/USD as Bonny light crude price rose week-on-week by 2.34% to USD40.70 as at Thursday, June 25, 2020.
However, Naira/US Dollar exchange rate rose (i.e Naira depreciated) by 1.57% and 1.10% to close at N452.00/USD and N460.00/USD respectively at the Bureau De Change and the parallel (“black”) markets.
Cowry Assets also reported that at the Interbank Foreign Exchange market, NGN/USD closed flat at N358.51/USD, amid weekly injections of USD210 million by CBN into the foreign exchange market: USD100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), USD55 million was allocated to Small and Medium Scale Enterprises and USD55 million was sold for invisibles.
Amid sales pressure, the values of FGN bonds traded at the over-the-counter (OTC) segment appreciated for most maturities last week.
Specifically, the 5-year, 14.50% FGN JUL 2021 paper rose by N0.53 while the 7-year, 13.53% FGN MAR 2025 note peaked by N1.29.
The 10-year, 16.29% FGN MAR 2027 debt and the 20-year, 16.25% FGN APR 2037 bond rose by N7.09 and N6.48 respectively.
Their corresponding yields fell to 4.16% (from 4.80%), 7.14% (from 7.44%), 8.76% (from 9.95%) and 10.05% (from 10.65%) respectively.
Analysts at Cowry Asset expect OTC bond prices to appreciate (and yields to moderate) against the backdrop of expected boost in financial system this week.
Meanwhile the Central Bank of Nigeria (CBN) has debited 26 banks with the sum of N216.1 billion as part of its Cash Reserve Ration compliance requirement.
This is coming on the heels of N459.7 billion and N1.4 trillion debited the banks in May and April respectively for failing to meet stipulated CRR targets.