October 4, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N1.1trn on Friday (30 September ‘22). Overnight and repo rates closed within a range of 15% – 20.5%. The significant increase in money market rates can be attributed to market illiquidity, as the outflow from the NTB primary market auction (N179.3bn) combined with higher CRR debits in line with the upward revision of the CRR  to 32.5%, outweighed the inflow from FAAC disbursement and FGN bond coupon payments. This week, we expect rates in the money market to trend upwards as outflow from OMO and fx auctions outweigh inflow from OMO maturities (N60bn).
• The average NTB yield declined by -28bps w/w to close at 7.1%. At the primary market NTB auction held last week Wednesday, the CBN offered N141.3bn but allotted N179.3bn worth of NTB’s to market participants. Stop rates changed across the three tenors 91-day: 6.49% (previously 5.5%), 182-day: 7.5% (previously 6.0%), 364-day: 12.0% (previously 9.75%). Meanwhile, the average yield for OMO bills increased by +88bps w/w to close at 10.3%. 
• As for the secondary market for FGN bonds, the average yield increased by +41bps to close at 13.3% w/w. At the Eurobond market, the average yield increased by +132bps to close at 14.3% w/w.
• According to Eurostat, Eurozone inflation rose to 10% y/y in September ’22 compared with 9.1% y/y in August ’22. Inflationary pressure was significant in energy (40.8%), non-energy industrial goods (5.6%) and services (4.3%), food, alcohol and tobacco (1.8% y/y). Eurozone Manufacturing PMI declined slightly to 48.4 in September ‘22 from 49.6 in August ’22. We note that business confidence declined to its lowest level since May ‘20, as firms reduced purchasing activity due to concerns over the detrimental impact of rising inflation on consumer demand and firms’ costs. 

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