Turnover in the Fixed Income and Currency (FIC) markets for the month of August 2019 was N23.21trillion, representing a 41.87percent (N6.85trillion) month-on-month (MOM) increase on the turnover recorded in July 2019 (N16.36trillion).
FMDQ Fixed Income and Currency Markets Monthly Report shows the record FIC market turnover for August represents 43.36percent (N7.02trillion) year-on-year (YOY) increase from the turnover recorded in August 2018 (N16.19trillion).
Treasury Bills and FX product segments remained the major contributors to turnover in the FIC market, jointly accounting for 79.33percent of the total FIC market turnover in August 2019 and representing an 8.95percent increase in their joint contribution recorded in July 2019 (70.38percent). FX Market
Total FX market turnover in August 2019 was $25.69billion (N9.32trillion) representing a 76.82percent ($11.16billion) MOM increase. Analysis of FX turnover by trade type indicates MOM increase across all categories, with Member-cbn trades recording the highest percentage MOM increase at 125.45percent ($3.88billion), while Member-client trades recorded the highest MOM increase in dollar (nominal) terms, at $6.28bn (68.92percent).
Further, analysis by product type indicates that the MOM increase in FX turnover was mainly driven by the 82.18percent ($6.47billion) MOM increase in FX Spot turnover, with FX Derivatives turnover also reporting a MOM increase of 70.48percent ($4.69billion).
In August 2019, the 38th Naira-settled OTC FX Futures Contract (NGUS AUG 21 2019) with a total contract value of $638.23millon matured and was settled, with the Central Bank of Nigeria (CBN) introducing a new contract, NGUS SEP 30 2020 for $1billion at $/365.47.
This brings the total value of OTC FX Futures Contracts offered and settled since inception to date to circa $29.30billion and circa $11.01billion in open contracts.
In August 2019, the CBN Official Spot rate depreciated by $/N0.15 to close at $/N307. Similarly, the closing rate for the Naira against the US Dollar at the Investors’ and Exporters’ (I&E) FX Window depreciated by $/N1.25 to close at $/N362.93, while the parallel market rate remained constant at $/ N360 in August 2019.
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Fixed Income Market (T.bills and FGN5 bonds)
In August 2019, total OMO bills issued was N15.14trillion, representing a MOM decrease of 1.17percent (N0.18trillion), whilst average T.bills outstanding was N2.58trillion, representing a MOM increase of 0.78percent (N0.02trillion). Furthermore, average outstanding FGN bonds recorded a MOM increase of 1.74percent (N0.15trn) to close at N8.77trillion in August 2019 from N8.62trillion reported in July 2019
Trading intensity for FGN bonds decreased from 0.15 in July 2019 to 0.14 in August 2019, while trading intensity for T.bills increased to 0.51 in August 2019 from 0.35 in July 2019.
YTD Trading intensity for T.bills and FGN bonds stood at 3.62 and 1.11 respectively compared to 3.47 and 1.03 recorded in the corresponding period in 2018, indicating a marginal pick up in fixed income secondary market liquidity.
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In August 2019, T.bills within the 3M – 6M maturity bracket were the most actively traded among the short-term securities (that is 1M – 2Y) accounting for 35.24percent of the total Fixed Income market turnover, while FGN bonds within the 15Y – 20Y maturity bracket were the most actively traded among the medium to long-term securities, accounting for 4.19percent of the total Fixed Income market turnover.
Weighted average yields on the short- and medium- term Fixed Income maturities increased by 1.84percent and 1.11percent respectively in August 2019 which may be attributed to tight system liquidity which triggered selloffs, particularly on the shorter end of the yield curve.
Conversely, weighted average yield on long-term maturities decreased by 0.15percent as investors sought securities with higher returns, with the 2037 FGN bond showing an increase in demand. However, inflation-adjusted yield remained positive across all tenors in the period under review.
Money Market ( Repurchase Agreements /Buy-backs and Unsecured Placements/takings)
Turnover in the Repurchase Agreements/buy-backs segment of the Money Market increased MOM from N3.38trillion in July 2019 to N3.42trillion in August 2019, representing a 1.23percent ( N0.04trillion) MOM increase, whilst recording a 36.91percent (N0.92trillion) YOY increase from the turnover recorded in August 2018 (N2.50trillion).
The MOM decrease in total turnover in the Money Market by 0.59percent (N0.02trillion) to N3.51trillion in August 2019 indicates a MOM decrease in liquidity in the inter-bank market.
Consequently, the average Money Market O/N and OBB rates increased by 529bps and 500bps respectively to an average of 13.95percent and 12.87percent in August 2019 from 8.66percent and 7.87percent in July 2019.
Turnover in Unsecured Placements/takings in August 2019 was N0.09trillion, representing a 41.43percent (N0.06trillion) MOM decrease from the N0.15trillion recorded in July 2019, and a YOY increase of 32.56percent (N0.02trillion) from the turnover recorded in August 2018 (N0.07trillion).
Market Surveillance
Total number of executed trades reported on the E-bond Trading System in August 2019 was 18,652 representing a 26.50percent (3,907) MOM increase from the number of trades executed in July 2019 (14,745), driven by a MOM increase in T.bills trades by 32.87percent (4,182). However, FGN bonds trades declined by 13.59percent (275).
