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Total outstanding value of quoted CPs on FMDQ Exchange up to N826.7bn

FMDQ Exchange: Secondary market turnover up 70.20% month-on-month

FMDQ Exchange on Monday July 31 released its financial markets monthly report for June 2023. The total value of commercial papers (CPs) quoted on FMDQ Exchange in June 2023 was N52.13billion, representing a MoM decrease of 68.17percent (N111.64billion) from the value of CPs quoted in May 2023.

Quoted CPs were issued by institutions from various sectors including Financial Services (12), Manufacturing (3), Agriculture (2), Real Estate (2), and Commodities Trading (2).

As a result, the total outstanding value of CPs increased month-on-month (MoM) by 4.85percent (N38.24billion) to N826.67billion.

The total value of corporate bonds listed on FMDQ Exchange in June 2023 was N17.50billion representing a 43.55percent (N13.50billion) MoM decrease from May 2023 listings.

The corporate bond listings emanated solely from a single issuer in the Construction sector. As a result, the total outstanding value for corporate bonds increased MoM by 0.82percent (N13.35billion) to N1.650trillion in the review month.

Sovereign Securities

The Debt Management Office (DMO) sold T.bills valued at N204.50billion across its auctions in June 2023, representing a 36.97percent (N119.93billion) MoM decrease on the value of T-bills sold across its auctions in May 2023 (N324.43billion). Similarly, the DMO sold FGN Bonds worth N473.16billion in June 2023 via the reopening of one (1) off-the-run and issuance of three (3) on-the-run FGN Bonds.

The total sale represented a 131.43percent oversubscription of the amount offered, and a 13.22percent (N72.10billion) MoM decrease on the amount sold in May 2023 (N545.26billion) across the two (2) 10Y, one (1) 20Y and one (1) 30Y reopened FGN Bond maturities. The CBN did not auction OMO Bills in the primary market for the sixth consecutive month in June 2023.

FMDQ Exchange noted that its secondary market turnover was N21.74trillion, representing a month-on-month (MoM) and year-on-year (YoY) increase of 37.78percent (N5.96trillion) and 19.41percent (N3.53trillion) from May 2023 and June 2022 figures, respectively.

The Exchange noted that Foreign Exchange (FX), Money Market (MM) and CBN Bills transactions dominated secondary market activity, accounting for 80.49percent of the total secondary market turnover in June 2023.

The report shows that total spot market turnover for all products traded in the secondary market was N17.82trillion in June 2023, representing a month-on-month (MoM) increase of 33.24percent (N4.45trillion) from May 2023 figures.

The MoM increase in total spot market turnover was jointly driven by an improvement in turnover across all products with FX, MM and Fixed Income (FI) transactions increasing MoM by 65.82percent (N1.89trillion), 33.70percent (N1.39trillion) and 18.21percent (N1.16trillion), respectively.

The uptick in MM turnover was driven by an increase in Repos/Buybacks, offsetting the month-on-month decline in Unsecured Placement/Takings transactions.

Likewise, the improvement in FI turnover was driven by a month-on-month increase across all FI products, excluding OMO Bills and Other Bonds which decreased in the review period.

Spot FX market turnover was N4.77trillion ($7.73billion) in June 2023, representing a MoM increase of 65.82percent (N1.89trillion) from the turnover recorded in May 2023 (N2.88trilion).

In the FX Market, the US Dollar appreciated against the Naira, with the spot exchange rate ($/N) increasing by 35.07percent ($/N162.51) to close at an average of $/N625.90 in June 2023 from $/N463.39 recorded in May 2023. Further, exchange rate volatility spiked in June 2023 as the Naira traded within an exchange rate range of $/N464.67 – $/N770.38 compared to $/N462.23 – $/N465.13 recorded in May 2023.

Fixed Income (FI) market turnover was N7.52trn in June 2023, representing a MoM increase of 18.21percent (N1.16trillion) from the turnover recorded in May 2023 (N6.36trillion). The MoM increase in the FI market turnover was driven by the 31.88percent (N0.43trillion), 24.11percent (N0.34trillion) and 39.59percent (N0.69trillion) uptick in turnover across T.Bills, CBN Special Bills, FGN Bonds which offset the MoM decrease in turnover by 16.58percent (N0.30trillion) and 26.98percent (N0.003trillion) for OMO Bills and Other Bonds respectively.

As a result, the trading intensity (TI) for T.Bills, OMO Bills and FGN Bonds increased MoM by 0.09, 3.82 and 0.04 points to 0.38, 25.50 and 0.14 respectively. T.bills and FGN Bonds within the >6M – 12M and >20Y tenors respectively were the most traded sovereign FI securities, accounting for 30.35percent (N1.28trillion) and 17.47percent (N0.74trillion) of the secondary market turnover for sovereign FI securities in the spot market, respectively.

In June 2023, the yield spread between the 3M and 30Y sovereign FI securities decreased by 3.13 percentage points (ppts) to 8.16ppts, indicating a flattening of the sovereign yield curve. Real (inflation-adjusted) yields remained negative across the yield curve in June 2023.

Total turnover in the MM segment increased MoM by 33.70percent (N1.39trillion) to N5.53trillion in June 2023. The MoM uptick was driven by the 51.21percent (N1.77trillion) increase in Repos/Buy-backs which offset the 54.74percent (N0.37trillion) decrease in Unsecured Placement/Takings transactions, respectively.

The average Overnight (O/N) rate and Open Repos (OPR) rate (secured lending rate) decreased MoM by 3.01ppts and 3.00ppts respectively, to close at an average of 9.89percent and 9.41percent in June 2023.

Total turnover in the FX derivatives market segment was N3.92trillion ($6.35billion) in June 2023, representing a MoM increase of 63.03percent (N1.52trillion) from May 2023 figures.

The MoM uptick in the FX derivatives turnover was jointly driven by the 77.28percent (N0.78trillion) and 105.51percent (N0.74trillion) improvement in FX Swaps and FX Futures turnover which offset the 1.07percent (N0.01trillion) MoM decrease in FX Forwards transactions, respectively.

In the OTC FX Futures market, the near month contract (NGUS JUN 28, 2023) expired and open positions with a total notional value (NV) of $0.17billion were settled. A far month (60M) contract, NGUS JUN 28, 2028 was introduced at a Futures price of $/N1,531.07, representing a 117.60percent ($/N827.46) rate depreciation from the Futures price ($/N703.61) of the previous far month contract NGUS MAY 31, 2028.

The cumulative NV of open OTC FX Futures contracts increased for the seventh consecutive month to circa $6.96bn3 as at June 13, 2023, as hedging activity continues to pick up. This represents a MoM and YoY increase of 21.89percent ($1.25billion) and 84.62percent ($3.19billion) from its value as at May 31, 2023 and June 30, 2022, respectively.

Market activity in the OTC FX Futures accounted for $1.25billion worth of trades in June 2023. This represents a 56.84percent ($0.45billion) MoM increase relative to the monthly traded value recorded in May 2023 ($0.79billion). Specifically, the NV of OTC FX Futures contracts traded across the short-dated (1M – 13M) increased by 49.34percent ($0.39billion) to $1.19billion while the long-dated (14M – 60M) contracts increased to $0.06billion worth of

trades. As a result, the 7 – 12M tenor range recorded the highest concentration in traded value, accounting for 61.24percent ($0.76billion) of trading turnover across thirty-three (33) of the sixty-eight (68) deals conducted in the review period.

The average Futures price of OTC FX Futures contracts remained unchanged across all tenor buckets in the review month relative to May 2023.

However, Deliverable Forwards rates in June 2023 increased MoM across all tenor buckets relative to May 2023, with the 12M deliverable FX Forward contracts recording the highest MoM increase in price (that is expected depreciation of Nigerian Naira against the US Dollar) in the review month.