November 9, 2021/Coronation Research

Summary

• Opening market liquidity was reported at N113.2bn on Friday (05 Nov ‘21). Overnight and repo rates closed within a range of 12.0-14.5%. Last week, the average NTB yield declined by 15bps w/w to close at 5.3%. This is due to increased demand as local banks reinvested funds from OMO maturities earlier in the week. Meanwhile, the average yield for OMO bills decreased by 28bps w/w to close at 6.1%.
• As for the secondary market for FGN bonds, the average yield increased by 3bps w/w to close at 11.3%. We note that investors focused on the longer end of the curve.
• Last week, the US Federal Open Market Committee (FOMC) voted unanimously to maintain the key policy rate in a target range of 0.00% – 0.25%. We understand that the Federal Reserve will begin tapering the pace of its asset purchases later this month. On a monthly basis, the reduction will see USD10bn less in treasuries and USD5bn less in mortgage-backed securities. The committee is still prepared to adjust the pace of purchases if changes in the economic outlook tilt towards negative.
• According to the US Department of Labour, the US nonfarm payroll rose for the ninth consecutive month by a total of 531,000 in October compared with 194,000 recorded in September. The unemployment rate declined to 4.6%, compared with 4.8% in September. This was driven by increased employment in the services sector.