June 22, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N89.1bn on Friday (17 June ‘22). Overnight and repo rates closed within a range of 10 – 13%. The average NTB yield increased by +51bps w/w to close at 4.6%. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N34.9bn worth of NTBs to market participants, stop rates changed across the three tenors 91-day: 2.49% (previously 2.5%), 182-day: 3.79% (previously 3.84%), 364-day: 6.07% (previously 6.44%). Meanwhile, the average yield for OMO bills increased by +19bps w/w to close at 4.6%.
• As for the secondary market for FGN bonds, the average yield increased by 6bps w/w to close at 11.2%. There was buying interest at the middle of the curve. 
• At the Eurobond market, yields increased for all sovereigns under our coverage (average yield increased by +564bps w/w to 18.6%). Risk-off sentiments have driven the current spike in yields within the Eurobond market. Monetary policy tightening across advanced economies and deficit financing concerns on the back of the country’s current fiscal position are some reasons behind these sentiments. Borrowing costs are relatively high.
• Based on data from S&P Global, US Manufacturing PMI declined to 57 in May ‘22 from 59.2 recorded in the previous month. This is partly due to higher operating expenses triggered by the Russia-Ukraine crisis and COVID-19 lockdowns in China. Furthermore, the US Services PMI declined to 53.4 in May ’22 from 55.6 recorded in the previous month. This can be partly attributed to weakened consumer demand due to inflation. Overall, the Composite PMI declined to 53.6 in May ’22 from 56 recorded in April.

For the full Coronation fixed income and exchange rate (CFEX) update, please click here.