Fixed income market turnover drops by 31.12% in January
FMDQ Securities Exchange has announced that turnover in the fixed income and currencies markets (FIC) in January 2022 stood at ₦14.13 trillion, representing a month-on-month (MoM) decrease of ₦6.41 trillion from ₦20.54 trillion in December 2021
The figures also represent a year-on-year (YoY) increase of 8.44 per cent (₦1.10 trillion) over N13.03 trillion recorded in the corresponding period in January 2021 respectively.
In its January 2022 edition of (FIC) markets analysis, FMDQ Exchange also stated total foreign exchange (FX) market turnover in January 2022 was $10.13 billion (₦4.22 trillion), representing a MoM decrease of 38.12 per cent ($6.24 billion) from the turnover $16.37 billion recorded in December 2021
According to the exchange, the MoM decrease in total FX market turnover was driven by the 25.03 per cent ($2.18 billion) and 53.02 per cent ($4.07 billion) MoM decrease in FX spot and FX derivatives turnover, respectively in January 2022.
It explained that the MoM decrease in FX derivatives turnover was driven by MoM decrease in turnover for FX swaps, FX futures and FX forwards by 69.97 per cent ($3.12 billion), 73.76 per cent ($0.54 billion) and 16.74 per cent ($0.42 billion), respectively.
The contribution of FX derivatives to total FX market turnover decreased by 11.27 percentage points (ppts) to 35.61 per cent in January 2022.
In addition, it noted that FX and money market (mainly repurchase agreements or (Repos)) transactions were the highest drivers of market turnover, accounting for 57 per cent of the total FIC markets turnover within the period.
In the OTC FX futures market, the near-month contract (NGUS JAN 26, 2022) expired and open positions with a total notional value (NV) of $0.54 billion were settled. A far month (60M4) contract, NGUS JAN 27, 2027 was introduced at a Futures price of $/₦626.97.
The total NV of open OTC FX Futures contracts as at January 31, 2022, stood at circa $4.90bn representing a MoM and YoY decrease of 8.07 per cent ($0.43 billion) and 31.28 billion ($2.23 billion) respectively from its value as of December 31, 2021 and January 31, 2021.
Further analysis of the report showed that the Naira appreciated against the US Dollar, gaining 0.06 per cent ($/₦0.26) to close at an average of $/₦416.55 in January 2022 from $/₦416.81 recorded in December 2021.
Exchange rate volatility also decreased in January 2022 compared to December 2021 as the Naira traded within an exchange rate range of $/₦415.33 – $/₦422.67 in January 2022 compared to $/₦414.06 – $/₦435.00 recorded in December 2021.
In the primary markets, average discount rates for the 91-day T.bills remained constant at 2.49 per cent in January 2022. However, the 182-day T.bills declined by 0.08ppts to 3.37 per cent whilst the 364-day T.bills increased by 0.50 ppts
Average discount rates for CBN OMO bills with comparable tenors remained flat within the range of 7.00 per cent – 10.10 per cent in January 2022.
Also, within the same period, the coupon rates of reopened issues of 10Y10 and 20Y FGN11 Bonds decreased by 0.15ppts and 0.10ppts to 11.50 per cent and 13.00 per cent from 11.65 per cent and 13.10 per cent recorded in December 2021 respectively.
The report also revealed that OMO bills were the most traded FI securities despite the 23.01 per cent (₦0.81trillion) MoM decrease in turnover. Trading intensity for OMO bills decreased by 25 basis points (bps) to 1.73 from 1.98 in December 2021.
Similarly, turnover across other fixed income products such as T.bills, CBN Special Bills and other securities also decreased MoM in January 2022, except turnover for FGN bonds which increased MoM by 12.93 per cent (₦0.19 trillion), to ₦1.66 trillion in January 2022.