Fixed Income, Currency Market Records N3.3 trillion Drop in October

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Transactions in the nation’s Fixed Income and Currency (FIC) market recorded a decline of N3.3 trillion in the month of October.

According to FMDQ data, FIC market for the month ended October 31, 2018 was N13.35 trillion representing a 19.81 percent month on month decrease on the turnover of N16.65 trillion recorded in September, and a 9.60 percent represented N1.17 trillion year on year increase.

However, Treasury bills (T. bills) and Foreign Exchange (FX) remained the major drivers of turnover in the FIC market, jointly accounting for 73.98 percent of turnover in October, despite being lower by 5.02 percentage points from their level of contribution in September (79.00 percent).

Total FX market turnover in October was N4.55 trillion ($12.52 billion), representing 34.08 percent of FIC market turnover and a 31.62 percent ($5.79 billion) month on month decline from the turnover recorded in September ($18.31 billion).

Meanwhile, turnover at the Investors & Exporters (I&E) FX Window recorded a 37.94 percent ($2.9 billion) month on month decrease to close at $3.91 billion from the $6.30 billion recorded in September.

Year till date turnover at the I&E FX Window closed at $49.39 billion as at October 31, 2018.

The decrease in FX turnover in October was largely attributed to the decline in Member- Clients and Member-CBN4 trades (32.82 percent and 40.71 percent respectively) against the marginal increase in Inter-Member trades (0.22 percent).

Analysis of FX turnover by product type showed that FX Spot was the main driver of the month on month decline with a drop of 34.67 percent ($4.62 billion).

However, FX Derivatives also recorded a month on month decline of 23.45 percent ($1.17 billion), driven mainly by a 49.14 percent decline in FX Futures turnover.

In October, the $/N rate at the I&E FX Window appreciated by 38 kobo to close the month at $/N 363.54 (from $/N363.92 recorded in September), while the CBN Official Spot rate depreciated by $/N0.25 to close at $/N306.60 (from $/N306.35 recorded in September). The $/N rate at the Parallel market rate also depreciated between September and October by N1.00 to close at $/N362.00, closing lower than the rate at the I&E FX Window for the fourth consecutive month.

On the Fixed Income Market, total Treasury bills and FGN Bonds outstanding recorded month on month increases of N0.21 trillion and N0.10 trillion to close at N12.87 trillion and N8.21 trillion respectively as at October 31, 2018 mainly due to net issuances.

Also, the domestic debt mix by tenor as at October was 39:61 (long vs. short term) as against the planned ratio of 75:25 outlined in the Debt Management Strategy (2016 -2019)

Monthly Trading Intensity in the T.bills and FGN Bonds markets decreased from 0.52 and 0.17 in September, to 0.40 and 0.09 in October respectively.

Year till date trading intensity in both markets stood at 4.39 and 1.29 respectively compared to 5.70 and 1.17 as at the same period in 2017. T. bills within the 6-12 months maturity bracket remained the most actively traded, accounting for 24.82 percent of the total FI market turnover in October

Weighted average yields on short and medium-term maturities on the sovereign yield curve rose by 0.64 percentage points and 0.15 percentage points respectively in October, whilst the weighted average yields for long-term maturities decreased by 0.27 percentage points.

Yield spread between the 3-month T. bills and the 10-year FGN Bond decreased by 171 basis points to close at a 0.57 percent in October (2.28 percent in September).




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