Financial Markets Review Report

Transcription

1 Financial Markets Review Report Volume 1, Number 3 November 2015

2 FMDQ OTC Securities Exchange Disclaimer This document is produced by FMDQ OTC Securities Exchange (FMDQ) for information purposes only. FMDQ IS NOT an investment advisor, and does not endorse or recommend any securities or other investments. Market data and certain other information in this paper, as well as reference materials and/or links to other sites, have been compiled from publicly available sources believed to be reliable and are for general informational purposes only It does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction to likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration contained therein. All rates and figures appearing are for illustrative purposes only. To the extent that the research data emanates from public sources, the accuracy or completeness of the information contained herein is not guaranteed and is not intended to be relied upon for investment purposes FMDQ, its affiliates, third party information providers, or any of these entities' officers, employees, directors, or agents have not: (1) attested to the merit of the information provided in this paper or on any of these securities; or (2) endorsed or sponsored any of these securities. ADVICE FROM AN INVESTMENT PROFESSIONAL IS STRONGLY ADVISED. The information contained in this paper is provided for informational purposes only All information is provided "as is" without warranty of any kind. FMDQ (its affiliates) and the third party information providers make no representations and disclaim all express, implied, and statutory warranties of any kind to user and/or any third party including warranties as to accuracy, timeliness, completeness, merchantability, or fitness for any particular purpose Unless, in the event of wilful tortious misconduct or gross negligence, FMDQ (and affiliates) and the third party information providers have no liability in tort, contract, or otherwise (and as permitted by law, product liability), to user and/or any third party. FMDQ (and affiliates) and the third party information providers shall under no circumstance be liable to user, and/or any third party for any lost profits or lost opportunity, indirect, special, consequential, incidental, or punitive damages whatsoever, even if FMDQ has been advised of the possibility of such damages 1

3 Glossary Term AFO BN BPS CBN D DTM FMDQ DQL FCY FGN FRA FSI FX HHI M MDAs Mins mm NIBOR NIFEX NITTY OBB OMO Bills O/N OTC PaO Repo RFQ Definition Anonymous Firm Order Billion Basis Point Central Bank of Nigeria Day Days-to-Maturity FMDQ Daily Quotations List Foreign Currency Federal Government of Nigeria Forward Rate Agreement Financial Stress Indicator Foreign Exchange Herfindahl-Hirschman Index Month Ministries, Departments and Agencies of the Federal Government Minutes Million Nigerian Inter-bank Offered Rate Nigerian Inter-bank Foreign Exchange Fixings Nigerian Inter-bank Treasury Bills True Yields Open-Buy-Back Open Market Operations Bills Overnight Over-the-Counter Policy Rate against Overnight Rate Repurchase Agreement Request for Quote 2 Term SaO SPV TaN T.Bills trn TTM Y YoY YTD Acceptance Rate Definition Standing Lending Facility against Overnight Rate Special Purpose Vehicle Treasury Bills against NIBOR Treasury Bills Trillion Term-to-Maturity Year Exchange Rate Convergence Long-Term On-The Run Other Bonds Short-Term Trade Intensity Year-on-Year Year-to-Date Notes Ratio of accepted trade orders to total trade orders Spread between the CBN official rate and NIFEX Over one (1) year Most recently issued FGN benchmark security Agency, Sub-national, Corporate, Supranational bonds and Eurobonds One (1) year or less *All data as at October 23, 2015 Ratio of turnover to outstanding value for a period

4 Content Part 1 Executive Summary 4 Part 2 OTC Markets Analysis 6 Part 3 Market Surveillance 21 Part 4 League Table 25 Part 5 Appendix 29 3

5 Part 1 Executive Summary 4

6 Executive Summary Despite the predictions of a slow down in the economy and challenging times, OTC market activities continue to show improvement, with market turnover growing by 57% (N45.63trn) Year-on-Year. The month of September recorded the highest turnover in 2015 to date at N14.55trn boosted by a significant growth in T.bills and Repurchase Agreements / Open-Buy-Back transactions. Other developments in the OTC market are as follows: Bond yields dropped across the curve within the period by an average of 340bps with the 20Y bond dropping the most by more than 500bps YTD. The 5Y - 10Y tenor bucket remained the most traded in the review period. However, trading intensity remained flat Month-on-Month in FGN bonds The Financial Stability Indicator (FSI) widened within the review period to peak at 5.75% in the month of October, whilst recording 3.47% in September as the fixed income markets experienced significant volatility on the back of increased liquidity in the system The OTC market remained fairly diversified with no single player accounting for up to 25% of the total market turnover. The top five (5) banks in the OTC markets as at September 2015 were Stanbic IBTC Bank PLC, Access Bank PLC, First Bank of Nig. Ltd, Diamond Bank PLC and United Bank for Africa PLC 5

7 Part 2 OTC Markets Analysis 6

8 OTC Market Turnover TURNOVER (N trn) Jan Feb Mar Apr May Jun Jul Aug Sep Oct* Turnover in the OTC markets as at October 23, 2015 stood at N117.30trn; 45.63% (N36.75trn) above the value recorded within same period in 2014, with an average daily turnover of N583.57bn Member-Member trades continued to dominate activities in the market, accounting for 73.37% of total turnover Member-Client transactions accounted for 21.97% of OTC market turnover; while Members transactions with CBN accounted for 4.66% of total turnover PERCENTAGE CONTRIBUTION BY TRADE TYPE Jan Feb Mar Apr May Jun Jul Aug Sep Oct YTD Member - Member Member - Client Member - CBN

9 OTC Market Turnover../2 PERCENTAGE CONTRIBUTION BY PRODUCT Jan Feb Mar Apr May Jun Jul Aug Sep Oct YTD Foreign Exchange T.Bills FGN Bonds Other Bonds Repos/Buy-Backs Unsecured Placements / Takings Year-to-date activities in the T.bills and FX markets continued to dominate OTC turnover by product, contributing 32.20% and 25.16% respectively FGN bonds, Other bonds and T.bills recorded increased activity in the month of September; recording increases of 7.24%, 0.03% and 4.12% respectively, while FX, Repos/Buy-Backs and Unsecured Placements/Takings dropped by 5.12%, 5.41% and 0.86% respectively

10 FX Market Analysis Jan Feb Mar Apr May Jun Jul Aug Sep Oct YTD YoY (%) Ave. Interbank $/N No. of Business Days NA Turnover ($'bn) FX Spot (27.47) FX Swaps FX Forwards (65.75) Others Total (15.01) Daily Average (14.58) Year-to-date turnover in the FX market stood at $150.03bn; a decrease of $26.49bn (15.01%) over the value recorded in the corresponding period of 2014 Average daily turnover in the FX market continued to decline, shedding $0.62bn between January and October to close at $0.75bn YTD The FX Spot and Forwards markets experienced decreased transaction volumes YoY by 27.47% ($38.96bn) and 65.75% ($4.50bn) respectively. FX Swaps market turnover however increased 21.77% ($4.93bn) on a YoY basis 9

11 FX Market Analysis../2 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% FX TURNOVER BY TRADE TYPE Jan Feb Mar Apr May Jun Jul Aug Sep Oct Member - Member Member - Client Member - CBN Member-Client transactions continued to dominate activities in the FX market, accounting for 67.43% of total FX turnover YTD with Member-Member and Member- CBN trades accounting for almost equal share at 14.31% and 18.25% contribution respectively Total number of transactions recorded in the FX market YTD clocked 279,309 trades; translating to 1,390 trades per day 10

12 Treasury Bills Primary Market Amount Sold (N bn) Bid-to-Cover Ratio Aug Aug Sep Sep Sep Oct Oct-15 On aggregate, there was increased demand for T.bills in the month of September, with the bid-tocover ratio peaking at 4.7 The Central Bank, over the review period sold more 364 days T.bills than other maturities 11

13 Treasury Bills Market Analysis T.BILLS MONTHLY OUTSTANDING VALUES (N'bn) Jan Feb Mar Apr May Jun Jul Aug Sep Oct YTD T.bills 2, , , , , , , , , , , OMO bills 3, , , , , , , , , , , Total 6, , , , , , , , , , , Turnover (N'bn) Trade Intensity 2, , , , , , , , , , , TURNOVER BY MATURITY (%) 1M 1-3M 3-6M 6-12M Jan Feb Mar Apr May Jun Jul Aug Sep Oct Monthly turnover in the Bills market increased to N5.42trn in September 2015, before decreasing to N4.12trn in October resulting in a trade intensity of 6.70 YTD Activity was concentrated around T.bills with maturities of between 3-6M in September and October, accounting for 31.97% and 36.07% of total turnover respectively

14 Treasury Bills Market Activities - Daily Averages TIME DISTRIBUTION OF FILLED ORDERS Duration (Mins) ,440 Jan Feb Mar Apr May Jun Jul Aug Sep Oct ACCEPTED TRADES Jan Feb Mar Apr May Jun Jul Aug Sep Oct Analysis of trades carried out on the E-Bond trading system indicates an average of 42.62% of all Firm Orders was filled within ten (10) minutes, with over 90% of total trades filled within three (3) hours The rates of executed RFQ trades dipped to 2.02% in August before reaching a peak of 2.35% in October Acceptance rate for both AFOs and RFQs on T.bills averaged 97.90% and 1.96% respectively on a YTD basis AFO RFQ 13

15 FGN Bonds Primary Market Auction Date Security Tenor PRIMARY vs. SECONDARY MARKET YIELD Primary Market Yield (%) *Secondary Market Yield (%) **Yield Spread (%) 14-Aug Feb Aug Jul Sep Feb Sep Jul Oct Feb (0.14) 16-Oct Mar (0.55) BID-TO-COVER RATIO Jan Feb Mar Apr May Jun Jul Aug Sep Oct Yields in the secondary market in August and September were 380 bps, on average, higher than yields obtained at auction within the same period Demand for FGN bonds increased with a Bid-to-Cover ratio of 2.69 in September before dropping to 1.54 in October Note: *Benchmark bonds secondary market yields on auction day **Yield Spread is the difference between the secondary market and primary market yields on auction day; 14

16 bn FGN Bonds Market Volumes , , , ,000 2, , Jan Feb Mar Apr May Jun Jul Aug Sep Oct Average Outstanding Vol. Average Market Value Trade Intensity IMPLIED YIELD 1M 3 6 1Y FGN BOND MARKET Month Turnover Trade (N bn) Intensity Jan Feb Mar Apr 1, May Jun Jul Aug Sep 1, Oct 1, YTD 8, Year-to-date turnover for FGN bonds, settled at N8.42trn; a 36.18% (N2.24trn) YoY increase on the back of a trade intensity of 1.71 The yield curve parred downwards on a YTD basis, shedding an average of 5.63% on bills with less than 6M maturities 23-Oct 5-Jan 15

17 FGN Bonds Market Activities Daily Averages TIME DISTRIBUTION OF FILLED ORDERS DURATION (Mins) ,440 Jan Feb Mar Apr May Jun Jul Aug Sep Oct ACCEPTED TRADES (%) RFQs AFOs Jan Feb Mar Apr May Jun Jul Aug Sep Oct Activities in the FGN Bond market was similar to that of the T.bills market, in terms of Firm Order fill rates; with 46.70% of orders filled within ten (10) minutes Conversely, the FGN bond market witnessed on the average, 85.21% and 98.89% acceptance rates for RFQs and AFOs respectively 16

18 Other Bonds Market DOMESTIC BONDS OUTSTANDING VALUE (N'bn) N'bn Jan Feb Mar Apr May Jun Jul Aug Sep Oct Agency Sub-national Corporate * Supranational Total , Eurobonds ($'mm) FGN 1, , , , , , , , , , Corporate 4, , , , , , , , , , Total 6, , , , , , , , , , Turnover (N'bn) Domestic Bonds Eurobonds Total FGN EUROBONDS YIELD 5.125% Jul % Jan % Jul 2023 Five (5) additional corporate bonds were issued with an outstanding value of N64.89bn Yields on the FGN Eurobonds have gradually trended upwards; moving from 6.73 in August to 6.99 in October *Increase in Corporate bonds as a result of the reclassification of the Local Contractor Receivables Management (LCRM) and Nigerian Mortgage Refinance Company (NMRC) bonds as Corporate bonds 17

19 Money Market Repos / Buy-Backs Unsecured Placements / Takings TURNOVER (N'bn) Jan Feb Mar Apr May Jun Jul Aug Sep Oct* YTD 2, , , , , , , , , , , , , , , , , Total 3, , , , , , , , , , , % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% MONEY MARKET TURNOVER Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct.* Activities in the money market YTD, tilted towards secured markets, accounting for 70.72% of total money market transactions even though secured markets transactions declined by N1.05trn Unsecured Placements/Takings contribution to turnover increased marginally by N311.8bn in October On a YoY basis, Repos/Buy-Backs traded volumes increased by 39.61%, whilst Unsecured Placements/Takings volumes almost doubled at % Repos / Buy-Backs Unsecured Placements / Takings 18

20 Money Market../2 UNSECURED MARKET TURNOVER (N'bn) Bankers' Acceptances Money Market - FCY Local Currency Placements / Takings Money Market Derivatives Total Jan Feb Mar , , Apr , , May , , Jun Jul , , Aug Sep Oct SECURED MARKET TURNOVER (N'bn) By Bonds By T.bills Jan , Feb , Mar , Apr , May , Jun , Jul , Aug , Sep , Oct , Total 1, , Local currency Placements/Takings continue to dominate transactions in the Unsecured markets, accounting for 97% of turnover between August and October In the Secured market, turnover of transactions with bonds increased 13% to 16% in October, from the value recorded in August whilst T.bills transactions declined from 97% in August to 84% in October 19

21 Jan 05 Jan 19 Feb 02 Feb 16 Mar 02 Mar 16 Mar 30 Apr 13 Apr 27 May 11 May 25 Jun 08 Jun 22 Jul 06 Jul 20 Aug 03 Aug 17 Aug 31 Sep 14 Sep 28 Oct 12 Money Market../3 SaO (%) TaN (%) PaN (%) Standing Lending Rate against Overnight Rate (SaO) revealed high volatility in market liquidity positions in the review period Continuous liquidity in the money market, drove yields on T.bills southwards with a resultant effect on the TaN spread Spreads between the Policy rate and 3M NIBOR (PaN) widened between the months of August and October TaN, a measure of credit spread, was negative all through the review period with the spread widening by as much as 8.55% in October 20

22 Part 3 Market Surveillance 21

23 Market Surveillance Summary August 2015 SUMMARY OF E-BOND TRADING INFRACTIONS FOR AUGUST, 2015 Compliance Dealing Member A B C Ranking Total Infractions Access Bank PLC 1 Diamond Bank PLC 1 Ecobank Nigeria Limited 1 First Bank of Nigeria Limited 1 Rand Merchant Bank Nigeria Limited 1 Skye Bank PLC 1 Stanbic IBTC Bank PLC 1 Wema Bank PLC 1 Zenith Bank PLC 1 Citibank Nigeria Limited Enterprise Bank Limited Guaranty Trust Bank PLC Standard Chartered Bank Nigeria Limited Sterling Bank PLC United Bank for Africa PLC Fidelity Bank PLC FSDH Merchant Bank Limited Kakawa Discount House Limited Keystone Bank Limited Union Bank of Nigeria PLC Coronation Merchant Bank Limited Heritage Banking Company Limited First City Monument Bank Limited Unity Bank PLC A B C Responding to less than 35% of mandatory RFQs Delay in submitting weekly trade reports Failure to provide firm quotes for all benchmark securities by 10.00AM - Nil 22

24 Market Surveillance Summary September 2015 SUMMARY OF E-BOND TRADING INFRACTIONS FOR SEPTEMBER, 2015 Dealing Member Compliance Total A B C Ranking Infractions Access Bank PLC 1 Diamond Bank PLC 1 Ecobank Nigeria Limited 1 Rand Merchant Bank Nigeria Limited 1 Skye Bank PLC 1 Standard Chartered Bank Nigeria Limited 1 United Bank for Africa PLC 1 Kakawa Discount House Limited 1 Union Bank of Nigeria PLC 1 First Bank of Nigeria Limited 1 Stanbic IBTC Bank PLC 1 FSDH Merchant Bank Nigeria Limited 1 Zenith Bank PLC Guaranty Trust Bank PLC Sterling Bank PLC Fidelity Bank PLC Keystone Bank Limited Heritage Banking Company Limited Citibank Nigeria Limited Wema Bank PLC Coronation Merchant Bank Limited First City Monument Bank Limited Unity Bank PLC A Responding to less than 35% of mandatory RFQs B Delay in submitting weekly trade reports C Failure to provide firm quotes for all benchmark securities by 10.00AM - Nil 23

25 Market Surveillance Summary October 2015 Summary of E-Bond Trading Infractions for October, 2015 Dealing Member Compliance Total A B C Ranking Infractions Access Bank PLC 1 Citibank Nigeria Limited 1 Fidelity Bank PLC 1 First Bank of Nigeria Limited 1 FSDH Merchant Bank Limited 1 Stanbic IBTC Bank PLC 1 Union Bank of Nigeria PLC 1 Zenith Bank PLC 1 Diamond Bank PLC Ecobank Nigeria Limited Rand Merchant Bank Nigeria Limited Skye Bank PLC Wema Bank PLC Coronation Merchant Bank Limited Kakawa Discount House Limited Sterling Bank PLC United Bank for Africa PLC Guaranty Trust Bank PLC Standard Chartered Bank Nigeria Limited First City Monument Bank Limited Keystone Bank Limited Heritage Banking Company Limited Unity Bank PLC A Responding to less than 35% of mandatory RFQs B Delay in submitting weekly trade reports C Failure to provide firm quotes for all benchmark securities by 10.00AM - Nil 24

26 Part 4 League Table 25

27 OTC Activity Ranking Rank Institution OTC Share 1 Stanbic IBTC Bank PLC (Stanbic) 8.90% 2 Access Bank PLC (Access) 8.56% 3 United Bank for Africa PLC (UBA) 8.10% 4 First Bank of Nigeria Limited (First Bank) 7.89% 5 Diamond Bank PLC (Diamond) 7.81% 6 Skye Bank PLC (Skye) 7.48% 7 Ecobank Nigeria Limited (Ecobank) 6.79% 8 Union Bank of Nigeria PLC (Union) 5.10% 9 Citibank Nigeria Limited (Citibank) 4.60% 10 Standard Chartered Bank Nigeria Limited (SCB) 4.59% 11 Guaranty Trust Bank PLC (GTBank) 3.70% 12 Zenith Bank PLC (Zenith) 3.57% 13 First City Monument Bank Limited (FCMB) 2.93% 14 Fidelity Bank PLC (Fidelity) 2.63% 15 Sterling Bank PLC (Sterling) 2.26% 16 Kakawa Discount House Limited (Kakawa) 2.23% 17 FSDH Merchant Bank Limited (FSDH) 2.15% 18 Wema Bank PLC (Wema) 1.61% 19 Heritage Banking Company Limited (Heritage) 1.57% 20 Coronation Merchant Bank Limited (Former ADH) (Coronation) 1.41% 21 Keystone Bank Limited (Keystone) 1.05% 22 Enterprise Bank Limited (Enterprise) 0.97% 23 Rand Merchant Bank Nigeria Limited (RMB) 0.82% 24 Unity Bank PLC (Unity) 0.75% 41.26% The top five (5) players in the OTC market account for an aggregate value of 41.26% of total activities in the market No single player in the market accounts for more than 9% of the total market activity, as such, concentration risk is minimized The bottom five (5) players on the other hand, contribute a joint value of 5% 26

28 OTC Market Share YTD (%) Institution FX T.Bills FGN Bonds Other Bonds Repos / Buy- Backs Unsecured Placements / Takings Access Bank PLC Citibank Nigeria Limited Coronation Merchant Bank (FMR ADH) Diamond Bank PLC Ecobank Nigeria Limited Enterprise Bank Limited Fidelity Bank PLC First Bank of Nigeria Limited First City Monument Bank Limited FSDH Merchant Bank Limited Guaranty Trust Bank PLC Heritage Banking Company Limited Kakawa Discount House Limited Keystone Bank Limited Mainstreet Bank Limited Rand Merchant Bank Nigeria Limited Skye Bank PLC Stanbic IBTC Bank PLC Standard Chartered Bank Nigeria Limited Sterling Bank PLC Union Bank of Nigeria PLC United Bank for Africa PLC Unity Bank PLC Wema Bank PLC Zenith Bank PLC Note: Top 3 Institutions highlighted 27

29 2015 OTC Market Concentration YTD - HHI 5, , , , , , , , , FX T.Bills FGN Bonds Other Bonds Unsecured Repos / Buy- Placements / Backs Takings Activities in the Other bonds market remains concentrated amongst few players. This is due to the limited outstanding volume of bonds available for trading and limited price transparency Activities are most diversified in the T.bills and FGN bonds markets Unsecured HHI FX T.Bills FGN Bonds Other Bonds Repos / Buy- Backs Placements / Takings 1, , , HHI: Herfindahl Hirschman Index 28

30 Part 5 Appendix 29

31 Interest Rate Indicators M SPOT RATES vs 3x6 FRA FSI The spread between the 3M yield and 10Y bond yield deviated from the average value of 1.69% recorded in the first eight (8) months of the year to peak at 5.75% in the month of October whilst recording 3.47% in September Spread between 3M Spot rate and 3x6 FRA reached a peak of 3.87 at the end of August but continued declining due to decreasing spot yields

32 OTC Markets Summary OTC TURNOVER (N'trn) Change Daily Average Month No. of Busines s Days FX T.Bills FGN Bonds Other Bonds Repurchase Agreements / Buy-Backs Unsecured Placements / Takings 2015 YtD Same Period YoY (%) YoY (N'trn) N 'trn $/N $'bn Jan Feb Mar Apr May Jun Jul Aug Sep Oct YoY Change (%)

33 Contact Details Jumoke Olaniyan Group Head, Market Development e: t: t: , FMDQ OTC PLC 1 Olosa Street, Victoria Island, Lagos w: e: info@fmdqotc.com t: ,

34 Global Competitiveness Operational Excellence Liquidity Diversity