November 2, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N279.3bn on Friday (28 October ‘22). Call, overnight and repo rates closed within a range of 13% – 17%. This can be partly attributed to improvement in system liquidity on the back of inflows from FAAC disbursements, FGN bond coupon payments, net NTB issuances and an OMO maturity. This week, we expect rates in the money market to remain elevated primarily due to expected CBN CRR debits. 
• The average NTB yield increased by +76bps w/w to close at 11.1%. Meanwhile, the average OMO yield declined by -2bps w/w to close at 10.2%. At the latest primary market NTB auction held last week Wednesday, the FGN offered N240.6bn but allotted N109.2bn worth of NTBs to market participants. The stop rates changed across the three tenors 91-day: 6.50% (previously 6.47%), 182-day: 8.05% (previously 7.9%), 364-day: 14.5% (previously 13%). Meanwhile, the average OMO yield declined by -2bps w/w to close at 10.2%.
• As for the secondary market for FGN bonds, the average yield increased by +40bps to close at 14.1% w/w. At the last primary market FGN bond auction, the DMO offered N225bn but allotted N107.9bn worth of instruments through re-openings of 14.55% FGN Apr 2029 (14.5% previously 13.5%), 12.50% FGN Apr 2032 (15.0% previously 13.8%) and 16.25% FGN Apr 2037 (16.0% previously 14.5%). Demand in this auction was the lowest YTD (total subscription was N119.2bn). The relatively low demand largely reflects tight system liquidity amid the CBN’s contractionary monetary policy stance.
• As for the secondary market for FGN bonds, the average yield increased by +16bps to close at 14.3% w/w. At the Eurobond market, the average yield decreased by -118bps to close at 14.5% w/w.
• Based on preliminary estimates from the U.S. Bureau of Economic Analysis, the U.S. GDP increased by 1.8% y/y in Q3 ’22, unchanged from the growth figure recorded in the previous quarter.  On a q/q basis, GDP grew by 2.6% vs a contraction of -0.6% recorded in Q2 ’22.
• According to China’s Bureau of Statistics, GDP increased by 3.9% y/y in Q3 ’22, compared with an increase of 0.4% y/y in Q2 ’22. The uptick in growth reflects positive outcomes from the measures taken by the government to support the economy considering the ongoing COVID-19 lockdowns and restrictions, as well as sluggish growth in the real estate sector. The bureau warned that the recovery may be temporary due to domestic and global headwinds, and as such, more growth-supportive measures should be expected.

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