Bond returns & Fx markets: Nigerian market watch

The Nigerian money market has witnessed mixed trading sessions this week, with investors showing strong interest in both the treasure bills and bond markets. Deinma Iyagba, Currency Trader at UBA, provided insights into the current state of the market in a recent interview with CNBC Africa. Let's delve into the key points discussed during the interview:Starting with the treasure bills market, Iyagba mentioned that there was a bit of mixed trading today, with about 33% of demand being met at the auction yesterday. This led to fixed income investors turning to the secondary market to fulfill the remaining demand, causing rates to drop slightly. Currently, the market is trading at around 12.85% levels, with demand shifting from the primary to the secondary market, further pushing rates down.Moving on to the bond market, Iyagba highlighted interest in longer maturities such as 2023 to 2026 and 2028. It was noted that investors who couldn't get what they desired in the treasure bill market were moving their focus to the bond market as well. Overall, trading in bonds has been described as bullish throughout the week, with rates continuing to decline following the recent auction. As for liquidity levels, Iyagba mentioned that they have been relatively good, with rates dropping from over 15% on Monday to around 4% currently. Looking ahead to next week, Iyagba expects liquidity to improve further with scheduled FARC disbursements and bond maturities.On the FX market front, Iyagba reported relative stability throughout the week, with the Naira performing between 360 and 363 against the dollar. While there was some demand earlier in the week, liquidity improved towards the end of the week, resulting in slight rate drops. Assessing the forecast for the fixed income market in the coming week, Iyagba expects continued improvement in liquidity and anticipates additional OMO activities. The market is expected to remain stable barring any significant changes in inflation rates, which could impact the yield curve. In terms of the I&E window, Iyagba noted a growth in demand over the past two weeks, signaling investor confidence. End-of-year activities are expected to drive further demand next week, reflecting a positive outlook for the market. Finally, when discussing the FX reserves and the CBN's efforts to defend the Naira, Iyagba expressed confidence in the CBN's ability to maintain stability despite potential decreases in reserves due to external factors like oil prices. Overall, the outlook for the Nigerian money market remains optimistic, with bullish trading in bonds and a stable FX market.