August 15, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N41.5bn on Friday (12 August ‘22). Overnight and repo rates closed within a range of 12 – 15%. We expect rates in the money market to trend upwards this week, as the inflow of N100bn expected from OMO maturities on Tuesday may be insufficient to offset the outflows from upcoming auctions (FGN Bond, OMO and FX).
• The average NTB yield increased by +31bps w/w to close at 7.9%. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted 150.6bn worth of NTBs to market participants. Stop rates changed across the three tenors; 91-day: 3.5% (previously 2.8%), 182-day: 4.5% (previously 4.1%), 364-day: 7.45% (previously 7.0%). Meanwhile, the average yield for OMO bills increased by +60bps w/w to close at 11.1%.
• As for the secondary market for FGN bonds, yields trended upward at the short end of the curve. The average yield increased by 45bps w/w to close at 12.7%. The DMO is scheduled to hold its monthly FGN bond auction today (15 August). At the auction, the DMO is expected to offer instruments worth between N221-240bn through re-openings of the 13.53% FGN MAR 2025, 12.50% FGN APR 2032 and 13.00% FGN JAN 2042 bonds. We note that demand was relatively low at the previous auction. However, given the re-pricing of yields since the last auction, there could be increased buying interest from PFAs.
• At the Eurobond market, yields contracted for all sovereigns under our coverage. The average yield declined by -147bps w/w to 10.5%. 
• According to Eurostat, Eurozone inflation rose to 8.9%y/y in July ’22 compared with 8.6% y/y  in June ’22. The headline inflation rate remains well above the European Central Bank’s (ECB) target of 2%. Inflationary pressure was significant in food, alcohol and tobacco (9.85% y/y), non-energy industrial goods (4.5% y/y) and services (3.7% y/y). Meanwhile, inflationary pressure eased slightly for energy (39.7% y/y). 

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