Fixed Income, FX Markets Sustains Momentum Recording N15.31trn, $10.12bn Turnover In One Month

Investors’ interest in the fixed income and currencies markets has continue to soar as both markets recorded significant increase in turnover in June 2021, a report by FMDQ OTC limited has revealed.

Analysis of the report revealed that fixed income markets recorded a turnover of N15.31 trillion for the month ended June 30, 2021, representing a month-on-month (MoM1) increase of 49.51 per cent to N5.07trillion and a year-on-year (YoY2) decrease of 7.04 per cent (N1.16trn).

The report revealed that foreign exchange (FX) and money market transactions were the highest contributors to the fixed income markets turnover in June 2021, jointly accounting for 64.18 per cent of the total fixed income markets turnover.

Similarly, the FX market recorded a turnover of $10.12bn (N4.16trillion), in June 2021, representing a MoM increase of 38.44 per cent ($2.81billion) from the turnover recorded in May 2021 ($7.31billion).

According to FMDQ, the MoM increase in total FX market turnover was jointly driven by the 17.90 per cent ($0.75billion) and 65.73 per cent ($2.06billion) increase in FX Spot and FX Derivatives turnover respectively in June 2021.

“The MoM increase in FX Derivatives turnover was driven by MoM increase in turnover across all derivative products, as FX Swaps, FX Forwards, FX Futures and Other Derivatives turnover increased by 88.07 per cent ($0.92bn), 19.80 per cent ($0.26billion), 118.18 per cent ($0.51billion) and 106.84 per cent ($0.37billion) respectively.

“In the OTC FX Futures market, the near month contract3 (NGUS JUN 30, 2021) with a total outstanding notional value (NV) of $0.29billion matured and was settled, whilst a new long-term (60M4) contract, NGUS JUN 24, 2026 was introduced at a Futures price of $/N613.76. The total NV of open OTC FX Futures contracts as at June 30, 2021 stood at circa (c.) $4.25bn5 representing a MoM increase of 7.32 per cent ($0.29billion) from its value as at May 31, 2021, and a reversal in the downward trend witnessed since May 2020, “it stated.

On the currency front, the report revealed that the Naira depreciated against the U.S. Dollar at the I&E FX Window, losing 0.01 per cent ($/N0.03) to close at an average of $/N411.30 in June 2021 from $/N411.27 recorded in May 2021, “whilst trading within a range of $/N410.00 and $/N412.00 in June 2021.”

Similarly, it said the Naira depreciated against the U.S. Dollar in the parallel market, losing 2.94 per cent ($/N14.29) to close at an average of $/N500.57 in June 2021 from $/N486.28 recorded in May 2021.

“Consequently, the average spread between the exchange rates in the formal (I&E FX Window) and unregulated (parallel) FX markets increased by $/N14.26 to $/N89.27 in June 2021. At the I&E FX Window, the Naira depreciated against the U.S. Dollar, losing 0.01 per cent ($/N0.03) to close at an average of $/N411.30 in June 2021 from $/N411.27 recorded in May 2021 whilst trading within a range of $/N410.00 and $/N412.00 in June 2021

“Similarly, the Naira depreciated against the U.S. Dollar in the parallel market, losing 2.94 per cent ($/N14.29) to close at an average of $/N500.57 in June 2021 from $/N486.28 recorded in May 2021. Consequently, the average spread between the exchange rates in the formal (I&E FX Window) and unregulated (parallel) FX markets increased by $/N14.26 to $/N89.27 in June 2021.”

The report added that treasury bills were the most traded sovereign debt securities in the month under review, accounting for 28.71 per cent (N0.79trillion) of the total sovereign Fixed Income market turnover, while FGN Bonds with term-to-maturity of 20Y or higher were the most actively traded long-term11 sovereign debt securities, accounting for 23.00 per cent (N0.63trillion) of the total sovereign Fixed Income market turnover.

It added, “Total turnover in the money market segment increased MoM by 100.35 per cent (N2.84trn) to N5.67trn in June 2021. This was driven by the MoM increase in Repos/Buy-backs turnover and Unsecured Placements/Takings by 102.63 per cent (N2.73trillion) and 58.82 per cent (N0.10trillion) respectively. The average OBB rate (secured lending rate) and O/N rate increased by 1.40ppts and 1.31ppts respectively, to close at 16.71 per cent and 17.19 per cent in June 2021.”

– Thisday