FIXED INCOME MARKETS
Money Markets
Despite the outflows from NTB and FGN local bond auction settlements, FAAC credits and bond coupon led system liquidity to close the week with a positive balance. Consequently, the Open Repo Rate (OPR) and the Overnight Rate (O/N) decreased by 652 bps and 681 bps to 25.78% and 26.17% respectively, compared to the previous week.
Outlook: We expect the current status to persist, barring any significant outflows.
Treasury Bills
Before Wednesday’s primary auction, the treasury bills market was mixed. After the auction, the market trended bullish, with significant unmet bids at the auction seeking several mid and long-dated papers in the secondary market..
The NTB auction results showed strong investor interest in the 1-year paper, with about 88.57% subscription on the 364-Day paper. In the end, the DMO allotted ₦291.03 billion, despite offering ₦409.98 billion. Total subscription printed at c.₦1.03 trillion. The stop rates for the 91-Day, 182-Day, and 364-Day papers settled at 18.20% (-10bps), 19.20% (-10bps), and 20.90% (-98.9bps), respectively, compared to the previous stop rates.
Overall, the average mid-rate declined by 91 bps week-on-week, settling at 19.81%.
Outlook: We expect a high probability of continued bullish sentiment throughout next week, while the market eagerly anticipates the NTB auction calendar for Q4 2024.
FGN Bonds
The week started with a surprise sale of bonds worth ₦374.749 billion at the primary market, despite a downward revision of the offer size from ₦300.00 billion to ₦190.00 billion. Additionally, the DMO reported a total subscription of approximately ₦460.18 billion. Consequently, the total bid-to-cover ratio was about 1.23x, while the stop rates exhibited mixed results. The stop rate for the 2029 paper closed higher at 20.30%, while the stop rates for the 2031 and 2033 papers closed lower at 20.90% (-10bps) and 21.50% (-48bps) respectively.
Throughout the rest of the week, the market was mixed-to-bullish, as demand increased due to improved liquidity supported by FAAC and bond coupon inflows. Consequently, the average mid-yield decreased by 43 bps to 18.96% on a week-on-week basis.
Outlook: We anticipate a mixed to bullish bias next week.
Equities
The Nigerian stock market concluded the week on a bearish note, with the ALL-Share Index dropping by 1.16% week-on-week and settling at 95,973.45 points, down from 97,100.31 points the previous week. The year-to-date return was 28.35%, and the market capitalization ended the week at ₦55.13 trillion.
Outlook: We expect similar momentum next week.
Foreign Exchange
The Naira appreciated against the USD by 0.62% week-on-week, reaching ₦1,570.14/$.
Outlook: We expect market to trade within ₦1500-1600 levels next week
Eurobonds
The Eurobonds market had a positive week, with increased buying interest due to dovish minutes from July’s FOMC meeting and a similarly dovish speech from Powell at the Fed’s annual economic symposium in Jackson Hole. As a result, the average mid-yield on the Nigerian curve decreased by 29 basis points week-on-week to 9.94%.
Outlook: Next week, we expect players to continue to keep track of key economic data such as Initial Jobless Claims and the PCE Price Index. Meanwhile, the market continues to anticipate a strong potential for a rate cut in the next Fed meeting.
Commodities
Crude oil prices declined this week due to weakness in global demand. Overall, brent oil decreased by 0.90% to $78.96 per barrel, while WTI declined by 2.43% to $74.79 per barrel. The price of gold increased by 0.40% to $2,547.90 per ounce.
Outlook: We expect a mixed trend next week.
