August 30, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N106.6bn on Friday (26 August ‘22). Overnight and repo rates closed within a range of 13 – 16%. This week, we expect rates in the money market to moderate slightly, given expected inflows from FAAC and an fx refund. The expected inflow could potentially outweigh outflow (i.e. from a CBN fx retail auction and CRR debits) during the week.
• The average NTB yield declined by -5bps w/w to close at 7.8%. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted 295.5bn worth of NTB’s to market participants. The stop rates changed across the three tenors; 91-day: 4% (previously 3.5%), 182-day: 5% (previously 4.5%), 364-day: 8.5% (previously 7.45%). Meanwhile, the average yield for OMO bills declined by -2bps w/w to close at 11.1%. 
• As for the secondary market for FGN bonds, the average yield declined marginally by -1bps to close at 12.8% w/w. 
• At the Eurobond market, the average yield declined by -23bps to close at 11.9% w/w.  
• According to S&P Global, US manufacturing PMI declined to 51.3 in August ‘22 from 52.2 recorded in July ‘22. This is the slowest growth in factory activity since July ’20 and it can be largely attributed to muted demand conditions due to inflationary pressure. We note that constraints in manufacturing supply chains are easing as manufacturers registered the slowest rise in input costs. The US services PMI sharply declined to 44.1 in August ’22 from 47.3 in July ’22, as interest rate hikes and inflation dampened customer spending. Overall, the composite PMI declined to 45.0 in August ‘22 from 47.7 in July ’22.

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