September 27, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N51.1bn on Friday (23 September ‘22). Overnight and repo rates closed within a range of 6% – 16%. This week, we expect rates in the money market to moderate slightly (on the back of expected inflow from FAAC and coupon payments). Furthermore, we expect a reversal in money market rates (i.e. to trend upwards) towards end-week due to an expected fx retail auction and potential CRR debits.
• The average NTB yield declined by -15bps w/w to close at 7.4%. Meanwhile, the average yield for OMO bills declined by -113bps w/w to close at 9.4%. 
• As for the secondary market for FGN bonds, the average yield increased by +15bps to close at 12.9% w/w. At the latest primary market FGN Bond auction, the DMO offered N225bn but allotted N229.2bn worth of instruments through the re-openings of the 13.53% FGN March 2025 (13.5%; previously 12.5%), 12.50% FGN Apr 2037 (13.8%; previously 13.5%), 16.2% FGN Apr 2037 (14.5%). The auction was oversubscribed as there was increased buying interest from investors. 
• At the Eurobonds market, the average yield increased by +38bps to close at 13.0% w/w.
• Last week, the FOMC voted unanimously to raise its key policy rate by 75bps to 3.00% – 3.25% at its September meeting. This is the third consecutive increase. The committee has left the door open for further rate hikes in subsequent meetings on the back of its commitment to return inflation to its 2% objective. The “dot plot” showed that the end-2022 median rate is 4.4% while the median Fed fund target rate for end-2023 is 4.6%. This implies another 75bps increase in the near future.

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