September 5, 2022/Coronation Research

Summary

• Opening  market liquidity was reported at N422.5bn on Friday (02 September ‘22). Overnight and repo rates closed within a range of 11 – 14%. This week, we expect rates in the money market to trend upwards, as outflows from the NTB auction scheduled to hold on Wednesday and possible CRR debits could potentially outweigh estimated inflow of N214.7bn from an NTB maturity during the week.
• The average NTB yield declined by -14bps w/w to close at 7.7%. Meanwhile, the average yield for OMO bills declined by -7bps w/w to close at 11.1%. At last week’s OMO auction, the CBN offered and allotted N50bn worth of OMO bills to market participants and maintained stop rates across the three tenors (103-day: 7.0%, 180-day: 8.5%, and 365-day: 10.1%).
• As for the secondary market for FGN bonds, the average yield declined marginally by -2bps to close at 12.8% w/w. There was buying interest at the shorter end of the curve. At the Eurobond market, the average yield increased by +97bps to close at 12.9% w/w.
• According to Eurostat, Eurozone inflation rose to 9.1%y/y in August ’22 compared with 8.9% y/y in July ’22. Inflationary pressure was significant in food, alcohol, and tobacco (10.6% y/y), non-energy industrial goods (5% y/y) and services (3.8% y/y). Meanwhile, inflationary pressure eased slightly for energy (38.3% y/y). The headline inflation rate exceeds the European Central Bank’s target of 2%. According to S&P Global, Eurozone Manufacturing PMI declined slightly to 49.6 in August ‘22 from 49.8 in July ’22. The decline in factory activity since May ’20, is largely on the back of weaker demand as inflationary pressure impacted consumer spending. 

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