June 29, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N231.4bn on Friday (24 June ‘22). Overnight and repo rates closed within a range of 13 – 14%. The average NTB yield increased by +15bps w/w to close at 4.8%. Meanwhile, the average yield for OMO bills increased by +59bps w/w to close at 5.2%.
• As for the secondary market for FGN bonds, the average yield decreased by -5bps w/w to close at 11.1%. At the last primary market FGN bond auction, the DMO offered N225bn but allotted N226.1bn worth of instruments through re-openings of the 13.53% FGN Mar 2025 (10.10%, previously 10.0%), 12.50% FGN Apr 2032 (12.5%, unchanged) and 13.00% FGN Jan 2042 (13.15%, previously 13.0%). Demand was considerably higher (total subscription was N552.4bn).
• At the Eurobond market, yields increased for all sovereigns under our coverage (average yield increased by +488bps w/w to 23.5%). The current spike (+488bps), is relatively lower than the increase (+564bps) in avg. yield recorded in the previous week. This is largely due to risk-off sentiments triggered by policy tightening across central banks in advanced economies.
• Based on data from S&P Global, the Eurozone Manufacturing PMI declined to 52 in June ’22 from 54.6 recorded in May ‘22. This is due to higher input costs (raw material, energy and wages). The Eurozone services PMI declined to 52.8 in June ‘22 compared to the 56.1 recorded in the previous month. S & P Global noted that the upticks in inflation led to a downturn in tourism, while the recent rate hikes by central banks across advanced economies to rein in inflation weighed on banking and real estate activity. Overall, the Composite PMI declined to 51.9 in June ’22 from 54.8 recorded in May ’22.

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