Monday, July 20, 2020
MPC Holds Rate at 12.5%
The Central Bank of Nigeria’s Monetary Policy Committee decided to retain the benchmark interest rate at 12.5 percent while also keeping all previous parameters.
Market Insight– The Nigerian equities market started the week on a negative note with both the All-Share Index and the NSE-30 Index closing in the red. Major sector indices showed a divergence. The Banking (-0.45 percent) sector closed in the negative territory, while the Industrial sector recorded marginal losses of 0.01 percent. On the other hand, the Insurance (+0.36 percent) and Oil & Gas (+0.32 percent) sectors recorded gains; while the Consumer goods sector remained unchanged. We expect bargain hunting to drive gains in next trading session but maintain that investors should buy high quality stocks with a medium to long term horizon.
Market Brief
- The Nigerian equity market closed on a negative note today, as All Share Index marginally decreased by 0.07 percent to close at 24,269.58 points.
- The market cap of equities listed on the NSE declined to ₦12.660 trillion from ₦12.670 trillion
- Market breadth was negative with 12 gainers as against 13 losers
NSE 30
- The NSE 30 Index decreased by 0.13 percent
- Fidelity Bank Plc was the only gainer, while Sterling Bank and Eco Bank Transnational Inc (ETI) were the key losers
Money Markets
- The Overnight (O/N) rate declined by 11.08 percent to close at 10.67 percent
- The Open Buy Back (OBB) rate also declined by 9.17 percent to close at 11.17 percent
Today, the CBN held its 4th Monetary Policy Committee (MPC) meeting for the year 2020. The committee voted to retain all parameters constant, and hence Monetary Policy Rate (MPR) remained unchanged at 12.5 percent. Furthermore, the Cash Reserve Ratio (CRR) and Liquidity ratio were also left unchanged at 27.5 percent and 30 percent respectively.
FX
The CBN recorded a further decline of $13.78 million WTD to $36.12 billion in reserves as FX outflows outpaced inflows. In the I&E FX market, trade volumes remained subdued due to tightened liquidity. Naira remained stable at ₦388.50 per dollar. Most participants maintained bids between ₦380.00 and ₦390.50 per dollar.
Treasury Bills
- NT-bills market closed on a negative note today, with average yield across the curve increasing by 1 basis point to close at 1.93 percent
- In the OMO bills market, average yield across the curve remained unchanged at 5.60 percent.
Bond Markets
- The FGN bond market closed on a negative note today, as the average bond yield across the curve cleared higher by 4 bps to close at 4.39 percent
- Selling pressure was witnessed across short and long tenor of the curve with average yields rising by 5 bps and 7 bps, respectively.
The DMO has released its FGN Bonds offer circular for July 2020 Primary Market Auction, indicating plans to offer FGN Bonds worth ₦130 billion through re-opening of 10-year (₦25 billion), 15-year (₦35 billion) & 30-year (₦35 billion) tenors and a new issue of a 25-year tenor bond (₦35 billion). The bond auction is scheduled to be held on July 22 with settlement on July 24, 2020. The bond auction is expected to record oversubscription as investors are likely to take advantage of the higher returns on FGN bonds as compared to the treasury bills.
Culled from FSDH Research