FMDQ OTC market review

Over-the-Counter (OTC) market summary for the month of February 2016 shows turnover of transactions carried out in the Fixed Income and Currency Markets (FIC) settled at N6.57trillion.

This represents N78billion (10.62percent) decrease over the value recorded in January 2016 (driven by a decline in FX transactions) and N5.02trillion (43.34percent) drop year-on-year (YoY).

Activities in the Foreign Exchange (FX) market contributed 23.89percent to the turnover, down by 4.32percent from the value recorded in January whilst Treasury Bills (T-Bills) transactions contributed 35.67percent to the total, up 7.51percent from previous month.

Secured market transactions (Repos / Buy-Backs) accounted for 25.54percent of total turnover in the month, while FGN bonds’ contribution settled at 12.42percent. Activities in Unsecured Placements/Takings accounted for 2.15percent of total turnover.

FX Market

Transactions in the FX market settled at $6.56billion, $2.35billion (26.385percent) below the value recorded in the previous month with an average daily turnover of $0.32billionn.

On a YoY basis, FX transactions recorded a decline of $12.46bn (65.50percent), driven mostly by the change of Interbank trading style to order based 2WQ system.

Member-Member trades declined $38.84million (31.87percent) as activity declined across all sub-categories. Member-Client transactions, also, recorded a decline of $1.96billion (25.51percent) to end the month at $5.73billion.

On aggregate, Spot and Swaps transactions both declined $2.29billion (31.11percent) and $0.02bn (1.56percent) in the month when compared with values recorded in January 2016. The CBN’s exchange rate remained flat at $/N196 in the month whilst the inter-bank exchange rate appreciated 0.32percent to trade at an average rate of $/N198.26. Rates in the parallel market peaked at $/N390 while recording an average value of $/N326.19 for the month.

Fixed Income Market (T-Bills and FGN bonds)

Turnover in the Fixed Income market recorded a decline of N71.30bn (2.21percent) month-on-month (MoM) to settle at N 3.16trillion. There was a pick-up of activities in the T-Bills market, as turnover recorded an increase of N273.33billion (13.21percent).

This value puts the percentage of T-Bills turnover in the total fixed income market at 74.18percent, a 10.11percent increase MoM. Outstanding OMO bills declined by N182.98billion (6.89percent) whilst T-Bills recorded an increase of N50 (1.80%) MoM.

Total outstanding bills as at the end of the month settled at N5.29trillion, translating to a trade intensity of 0.44. Outstanding values of FGN bonds increased by N90billion (1.49percent) MoM to settle at N6.11trillon.

The increase was a result of the reopening of the 15.54% FGN FEB 2020 and 12.50% FGN JAN 2026 bonds. Market size of FGN bonds increased marginally by 1.04 percent to close the month at 104.05 percent of par value.

Trade intensity for FGN bonds settled at 0.13. The yield curve experienced little volatility in the review period, save for FX funding and refunding that impacted on money market yields. On the average, the yield curve trended upwards 14bps. The upward movement in the yield curve was driven primarily by the short-end of the curve which moved 34bps whilst the mid and long-end were relatively flat.

Money Market (Repos/Buy-Backs and Unsecured Placements/Takings)

Activities in the secured markets (Repos/Buy-backs) settled at N1.68trillion, N108.21billion (46.06percent) below the value recorded in January. Unsecured Placements/Takings declined by N98.27bn (41.03percent) to settle at N147.27billion for the month. Liquidity prevailed in the banking sector as rates remained low in the month with OBB and O/N closing the month at 1.04percent and 1.38percent respectively, compared with 0.75perecnt and 1.17percent recorded in January

Market Surveillance

Executed trades captured on the E-Bond trading platform for the month settled at nine thousand, four hundred and fifty-two (9,452), 9.31 percent decrease MoM. Percentage of total executed trades compared to market activity, was higher at 2.60percent; 2.30perecnt was recorded in January.

Firm orders on T.bills increased by 111percent whilst the executed trades on same increase by 123percent. The FGN Bond market, however, recorded a decline of 13percent in total firm orders initiated while executed trades dropped by 40percent MoM. Request for Quotes (RFQs) recorded a decline across board, with total RFQs sent declining by 12percent and executed trades decreased by 11percent MoM.