September 12, 2022/Coronation Research

Summary

• Opening  market liquidity was reported at N94.6 bn on Friday (09 September ‘22). Overnight and repo rates closed within a range of 6 – 11%. This week, we expect rates in the money market to trend upwards, as estimated outflows of N200bn from an fx retail auction scheduled to hold on Friday outweighs the estimated inflow of N150bn from an fx refund scheduled for Thursday.
• The average NTB yield declined by -1bps w/w to close at 7.7%. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N214.7bn worth of NTBs to market participants. Stop rates increased across the three tenors; 91-day: 5.50% (previously 4%), 182-day: 5.85% (previously 5.0%), 364-day: 10% (previously 8.5%). Meanwhile, the average yield for OMO bills declined by -31bps w/w to close at 10.8%. 
• As for the secondary market for FGN bonds, the average yield increased by +18bps to close at 12.9% w/w. This was largely driven by the selloff of the 12.75% FGN APR 2023. We note that the DMO revised the Q3 ‘22 FGN bond issuance calendar. The agency has replaced the 13.00% FGN JAN-2042 bond with the 16.25% FGN APR-2037. 
• At the Eurobond market, the average yield declined by -64bps to close at 12.3% w/w. 
• The European Central Bank (ECB) raised its three key policy rates by 75bps in its September ’22 meeting. This is following a 50bps rate hike in July ‘22. The main refinancing rate is now at 1.25%, the marginal lending facility at 1.50% and the marginal deposit facility at 0.75%.  The ECB also revised upwards the projections for average inflation for 2022 and 2023 to 8.1% and 5.5% respectively. According to the ECB, further interest rate hikes would be necessary to return inflation to the 2% target. However, further adjustments to the interest rates will continue to be data-dependent and follow a meeting-by-meeting approach. Additionally, Eurozone growth projections were revised for 2022 and 2023 to 3.1% and 0.9% respectively.

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