FMDQ OTC Records N119Trillion Half Year Turnover

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By Bamidele  Famoofo

Turnover in the Fixed Income and Currency (FIC) markets for half-year period ended June 30, 2019 was N199.22 trillion (about $51164billion). The figure was higher by 38 percent compared with the half year turnover performance of the markets in 2018.

The FIC market recorded a half year turnover of N86.40 trillion ($238.40billion) in 2018, representing an increase of N32.82trillion compared to ongoing financial year’s N119.22trillion six months turnover.

Meanwhile, summary of the performance of the FMDQ OTC Securities Exchange in the month of June, 2019 showed that turnover in the Fixed Income and Currency markets for the month ended June 30, 2019 was N19.12trillion, representing a 6.70 percent (N1.37trn) month on month (MoM) decrease on the turnover recorded in May 2019 (N20.49trn); whilst recording a 10.93 percent (N1.88trn) year on year (YoY) increase from N17.23trillion recorded in June 2018.

“Transactions summary for June, 2019 showed that Treasury Bills and Foreign Exchange (FX) product segments remained the major contributor to turnover in the OTC market, jointly accounting for 70.72 percent of the total OTC market turnover in June 2019 and representing a 1.75 percent increase on their joint contribution in May 2019 (68.97%),” FMDQ OTC disclosed.

FX Market 

Total FX market turnover in June 2019 was $16.78billion (N6.05trn at $/N360.74), representing a 10.16 percent ($1.90bn) MoM decrease.

Analysis of FX turnover by trade type indicated MoM decrease across all categories, with Member-Clients trades recording the highest MoM decrease at 14.35 percent ($1.75bn).

Analysis by product type indicated that the MoM decrease in FX turnover was driven by the 23.15 percent ($2.47bn) MoM decrease in FX Spot, despite the 7.13 percent ($0.57bn) MoM increase in FX Derivatives turnover.

In June 2019, the 36th Naira-settled OTC FX Futures Contract (NGUS JUN 26 2019) with total open contracts size of $529.10million matured and was settled, bringing the total value of OTC FX Futures Contracts offered and settled on the Exchange since the introduction of the product to c.$16.74billion, with a total of $25.86billion in open contracts. Further, in addition to the new 12-month contract (NGUS JUN 24 2020) introduced in June at a price of $/N362.38, a newly introduced contract, the 13-month contract (NGUS JUL 29 2020) with futures price of $/N362.53 was also listed in June 2019 to enable market participants obtain a full 365-day hedge on their FX exposures, which was not possible under the previous existing market structure.

In June 2019, the CBN Official Spot rates and the average exchange rate of the Naira against the US Dollar at the I&E FX Window appreciated from the rates recorded in May 2019 by $/N0.05 and $/N0.09 close at $/N306.90 and $/N360.64 respectively, while the average parallel market rate remained constant at $/N361.00.

Fixed Income 

In June 2019, average OMO6 bills outstanding were N14.96trillion, representing a MoM increase of 2.86 percent (N0.42trn) from N14.54trilion recorded in May 2019. Conversely, average T.bills outstanding recorded a MoM decrease of 0.89 percent (N0.02trn) from N2.58trillion in May 2019 to N2.56trillionn in June 2019. On the other hand, average FGN bonds outstanding recorded a MoM increase of 1.12 percent (N0.10trn) to close at N8.84trillion in June 2019 from N8.74trillion in May 2019.

Trading intensity, representing the ratio of turnover to outstanding amount for FGN bonds increased from 0.17 in May 2019 to 0.18 in June 2019 while it remained unchanged for T.bills  Trading intensity in the T.bills and FGN bonds markets YTD7 stood at 2.74 and 0.82 respectively compared to 2.67 and 0.71 for the same period in 2018. T.bills within the 6-12 months maturity bracket remained the most actively traded in June 2019, accounting for 49.52 percent of the total FI market turnover.

In June 2019, weighted average yields on the medium-term and long-term maturities decreased by 0.47 percent and 0.13 percent respectively, whilst weighted average yields on short-term maturities increased by 0.15 percent due to the increase in yield on 1million securities. “This may be attributable to sustained demand for securities with longer term maturities as market participants are focused on booking profits in anticipation of a further decrease in OMO stop rates by the CBN. Furthermore, inflation-adjusted yield in the period under review remained positive for the 1million tenor,” FMDQ OTC explained.

Turnover in the Repurchase Agreements/Buy-Backs segment of the Money Market has declined consistently from March 2019 where turnover stood at N5.38trillion. In June 2019, turnover was recorded at N3.64trillion, representing a 21.40 percent (N1.00trn) MoM decrease from N4.63trillion recorded in May 2019, whilst recording a 56.95 percent (N1.32trn) YoY increase from the turnover recorded in June 2018 (N2.32trn).

However, turnover in Unsecured Placements/Takings in June 2019 was N0.30trillion, representing a 39.75 percent (N0.09trn) MoM increase from the N0.22trillion recorded in May 2019, and a YoY increase of 612.84 percent (N0.26trn) from the turnover recorded in June 2018 (N0.04trn).

The MoM decrease in total turnover in the Money Market is attributable to the 0.93 percent and 0.71 percent decrease in average Money Market O/N8 and OBB9 rates respectively, which closed at 8.08 percent and 7.50 percent in June 2019 from 9.01 percent and 8.21 percent in May 2019; indicating an increase in liquidity in the inter-bank market.

Market Surveillance 

Total number of executed trades reported on the E-Bond Trading System in June 2019 was 11,478 representing a 23.20 percent (3,467) MoM decrease from the number of trades executed in May 2019 (14,945), driven by a MoM decrease in T.bills and FGN bonds trades by 3,150 (23.83%) and 317 (18.37%) respectively.

Performance Review

Turnover in the Fixed Income and Currency (FIC) market has witnessed a boost after a slow start in January, 2019 at N15.08trillion, representing a 14.85 percent (N2.63trn) MoM1 decrease on the turnover of N17.71trillion recorded in December 2018, and a 28.78 percent (N3.37trn) YoY2 increase.

Turnover in February grew by 27.19 percent to N19.18trillion, and a 52.38 percent YoY2 increase from N12.59trillion recorded in February 2018.

Turnover in the Fixed Income and Currency (FIC) markets for the month ended March 31, 2019 was N28.98trillion, representing a 51.09 percent (N9.80trn) MoM1 increase on the turnover recorded in February 2019 (N19.18trn); and an 84.47 percent YoY2 increase from N15.71trillion recorded in February 2018.

In April 2019, turnover in the FIC markets was N16.37trillion, representing a 43.51 percent (N12.61trn) MoM1 decrease on the turnover recorded in March 2019 (N28.98trn); and a 9.57percent YoY2 increase.