FX derivatives market turnover down by 70.42%

The total turnover in the FX derivatives market segment was $1.88billion (N1.45trillion) in July 2023, representing a month-on-month (MoM) decrease of 70.42percent ($4.47billion) from June 2023 figures, according to FMDQ Securities Exchange financial markets monthly report.

FMDQ said in the recently released report that the month-on-month decline in the FX derivatives turnover was driven by a decrease in turnover across all FX derivatives products, with contributions by FX Swaps, FX Forwards, and FX Futures decreasing MoM by 1.59percent ($1.30billion), 74.69percent ($0.83billion) and 100percent ($2.34trillion), respectively.

In the OTC FX Futures market, the near month contract (NGUS JUL 26, 2023) expired and open positions with a total notional value (NV) of $520million were settled.

A far month (60M) contract, NGUS JUL 26, 2028 was introduced at a Futures price of $/N1,567.49, representing an increase of 2.38percent ($/N36.42) in the Futures price relative to the Futures price ($/N1,531.07) of the previous far month contract (NGUS JUN 28, 2028).

The cumulative notional value of open OTC FX Futures contracts decreased MoM by 7.81percent ($530million) to circa $6.26billion in July 2023, after seven (7) consecutive months of increase in the NV of open contracts resulting from increased hedging activities.

The DMO sold T.Bills valued at N406.10billion across its auctions in July 2023, representing a 0.39percent (N1.59billion) MoM increase on the value of T-bills sold across its auctions in June 2023 (N404.51billion).

Similarly, the DMO reopened two (2) 10Y, one (1) 15Y and one (1) 30Y FGN Bonds worth N657.84billion in July 2023. The total sale represented a 182.73percent oversubscription of the amount offered, and a 39.03percent (N184.68billion) MoM increase on the amount sold in June 2023 (N473.16billion) for the same FGN Bond maturities. The CBN did not conduct any public OMO Bills auctions in July 2023.

There were no corporate bonds listed on FMDQ Exchange in July 2023 compared to N17.50billion worth of corporate bonds listed in June 2023. As a result, the total outstanding value for corporate bonds remained unchanged at N1.757trillion in the review month.

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Total value of CPs quoted on FMDQ Exchange in July 2023 was N117.32billion

The total value of CPs quoted on FMDQ Exchange in July 2023 was N117.32billion, representing a MoM increase of 42.85percent (N35.19billion) from the value of CPs quoted in June 2023.

Quoted CPs were issued by institutions from various sectors including Financial Services (5), Manufacturing (4), Real Estate (3), Agriculture (2), Chemical Supply & Oil Field Services (2), Commodities Trading (1), Public Sector (1), Telecommunications (1) and Consumer Staples (1).

As a result, the total outstanding value of CPs increased MoM by 14.10percent (N117.32billion) to N949.26billion.

FX, Money Market, CBN Bills transactions dominated secondary market activity

Secondary market turnover on FMDQ Exchange in July 2023 was N19.92trillion, representing a MoM decrease of 8.37percent (N1.82trillion) and YoY increase of 0.81percent (N160billion) from June 2023 and July 2022 figures, respectively.

Foreign Exchange (FX), Money Market (MM) and CBN Bills transactions dominated secondary market activity, accounting for 73.98percent of the total secondary market turnover in July 2023.

Total spot market turnover for all products traded in the secondary market was N18.47trillion in July 2023, representing a MoM increase of 3.68percent (N660billion) from June 2023 figures.

The MoM increase in total spot market turnover was driven by an improvement in turnover across MM and FI transactions which increased MoM by 16.35percent (N900billion) and 12.16percent (N910billion), respectively, despite the MoM decline in FX transactions by 24.34percent (N1.16trillion).

The uptick in MM turnover was driven by an increase in Repos/Buybacks, offsetting the MoM decline in Unsecured Placement/Takings transactions. Likewise, the improvement in FI turnover was driven by a MoM increase across all FI products, excluding CBN Special Bills and FGN Bonds which decreased in the review period.

Spot FX market turnover was N3.61trillion ($4.66billion) in July 2023, representing a MoM decrease of 24.34percent (N1.16trillion) from the turnover recorded in June 2023 (N4.77trillion).

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In the FX Market, the US Dollar appreciated against the Naira, with the spot exchange rate ($/N) increasing by 22.94percent ($/N143.60) to close at an average of $/N769.51 in July 2023 from $/N625.90 recorded in June 2023.

Further, exchange rate volatility decreased in July 2023 as the Naira traded within an exchange rate range of $/N740.08 – $/N803.90 compared to $/N464.67 – $/N770.38 recorded in June 2023.

Fixed Income market turnover was N8.43trillion in July

Fixed Income (FI) market turnover was N8.43trillion in July 2023, representing a MoM increase of 12.16percent (N910billion) from the turnover recorded in June 2023 (N7.52trillion). The MoM increase in the FI market turnover was driven by the 52.55percent (N940billion), 63.75percent (N980billion) and 402.37percent (N30billion) uptick in turnover across T.Bills, OMO Bills, Other Bonds which offset the MoM decrease in CBN Special Bills and FGN Bonds transactions by 57.36percent (N1trillion) and 1.24percent (N30billion), respectively. As a result, the trading intensity (TI) for T.Bills increased MoM by 0.21 to 0.59, whilst TI for FGN Bonds decreased MoM by 0.01 to 0.13.

T.bills and FGN Bonds within the >6M – 12M and >20Y tenors respectively were the most traded sovereign FI securities, accounting for 31.50percent (N1.62trillion) and 23.04percent (N1.18trillion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.

In July 2023, the yield spread between the 3M and 30Y sovereign FI securities increased by 1.05ppts to 9.21ppts, indicating a steepening of the sovereign yield curve.

Real (inflation-adjusted) yields worsened, sustaining its negative trend across the yield curve in July 2023. Total turnover in the MM segment increased MoM by 16.35percent (N900billion) to N6.43trillion in July 2023. The MoM uptick was driven by the 21.11percent (N1.10trillion) increase in Repos/Buy-backs which offset the 64.08percent (N200billion) decline in Unsecured Placement/Takings transactions, respectively. The average overnight (O/N) rate and Open Repos (OPR) rate (secured lending rate) decreased MoM by 3.98ppts and 4.02ppts respectively, to close at an average of 5.91percent and 5.39percent in July 2023.