July 27, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N211.1bn on Friday (22 July ‘22). Overnight and repo rates closed within a range of 14 – 16%. The average NTB yield increased by +35bps w/w to close at 7.3%. Meanwhile, the average yield for OMO bills increased by +158bps w/w to close at 8.9%.
• As for the secondary market for FGN bonds, the average yield increased by +38bps w/w to close at 11.9%. At the last primary market FGN bond auction, the DMO offered N225bn but allotted N123.9bn (USD288.7m) worth of instruments through re-openings of the 13.53% FGN Mar 2025 (11.0%, previously 10.1%), 12.50% FGN Apr 2032 (13.0%, previously 12.5%) and 13.00% FGN Jan 2042 (13.75%, previously 13.15%). Demand was significantly lower (total subscription was N142.3bn). The relatively low demand at the auction is reflective of tight system liquidity and investors apathy towards the current level of FGN bond yields.
• At the Eurobond market, average yield for the sovereigns decreased by -181bps w/w to 13.0%. 
• In its latest World Economic Outlook (WEO), the IMF has trimmed its global forecast for 2022 to 3.2% y/y from 3.6% y/y. For 2023, the growth projection was revised downwards from 3.6% y/y to 2.9% y/y. The risks to economic prospects continue to be challenged largely due to the trickledown effects of the Russia-Ukraine crisis. The revision can be attributed to the higher-than-expected global inflation (especially in the United States and major European economies) which is triggering tighter financial conditions, a worse-than-anticipated slowdown in China which reflects COVID outbreaks and lockdowns, and further negative spillovers from the Russia-Ukraine crisis.

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