Nigeria’s fixed income & Fx market review

Nigeria’s fixed income and foreign exchange markets have seen interesting trends this week, with a focus on the Treasury Bills market and the bond market, according to Deinma Iyagba, a currency trader at UBA. The Treasury Bill market has been trading bullish, with a spill of water demand from the primary auction causing rates to drop. The market remains attractive to investors, especially at the long end where effective yields are higher than in the bonds market. The bond market, on the other hand, experienced slight bullish activity this week. Investors were selling to take advantage of high yields, resulting in a spill over into the secondary market as they aimed to cover positions they couldn't win in the auction. Iyagba noted that interest rates are expected to remain stable in the short to medium term, as investors continue to exploit the higher yields in the TBS market. In terms of system liquidity, rates have ranged from 3 to 13%, with a slight spike due to retail debits. Looking ahead, Iyagba anticipates stable rates unless inflation drops significantly below 9%. The CBM's activities have been consistent, with weekly auctions held on Thursdays, and additional activity when there is excess liquidity in the system. Shifting focus to the foreign exchange market, Iyagba noted that the CBN has been defending the Naira with the reserves, but it has been challenging. Despite this, he expects rates to remain stable in the near future. Demand at the I&E window has been relatively stable, with rates ranging from 362 to 363 levels. As investors look to the new week, Iyagba anticipates that the yield curve will remain unchanged unless there is a significant drop in inflation levels that could prompt a cut in interest rates. Overall, the outlook for the fixed income and foreign exchange markets in Nigeria remains stable, with investors closely monitoring economic news for potential investment opportunities. In conclusion, the trading activities in Nigeria's money markets this week have been marked by bullish trends in the Treasury Bill market and slight bullish activity in the bond market. Despite system liquidity and stable interest rates, investors are keeping a close eye on inflation levels and economic news that could influence trading decisions in the coming week.