November 14, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N297.1bn on Friday (11 November ‘22). Call, overnight and repo rates closed within a range of 7% – 13%, as system liquidity tightened on the back of NTB and OMO auctions. This week, we expect rates in the money market to remain elevated primarily due to expected outflow from an FGN bond auction, fx retail auction, and possible CRR debits by the CBN. 
• The average NTB yield declined by 50bps w/w to close at 10.6%. At the latest primary market NTB auction held last Wednesday, the FGN offered N193.0bn but allotted N310.1bn worth of NTBs to market participants. The stop rates changed in one out of the three tenors; 91-day: 6.50%, 182-day: 8.05%, 364-day: 13.9% (previously 14.5%). Meanwhile, the average OMO yield declined by -2bps w/w to close at 10.2%. At the OMO auction held on Thursday, the CBN offered and allotted N20bn 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 by -6bps to close at 14.4% w/w. The DMO is scheduled to hold its monthly FGN bond auction today (14 November). At the auction, the DMO is expected to offer instruments worth N210-240bn through re-openings of the 14.55% FGN APR 2029, 12.50% FGN APR 2032, and 16.24% FGN APR 2037 bonds. Meanwhile, at the Eurobond market, the average yield declined by -241bps w/w to close at 11.4%.
• According to the US Bureau of Labor Statistics, headline inflation moderated to 7.7% y/y in October ‘22 compared with 8.2% y/y recorded in September ’22. This is the lowest headline inflation reading since January ’22 and the fourth consecutive moderation in headline inflation. This moderation can be largely attributed to a decline in energy prices. This was evident in gasoline (17.5% y/y), electricity (14.1% y/y), food (10.9% y/y), as well as used cars and trucks (2% y/y). Based on data from China’s National Bureau of Statistics, headline inflation moderated to 2.1% y/y in October ’22 vs 2.8% y/y recorded in September ’22. The moderation was significant in food prices (7.0% y/y), transport and communication (3.1% y/y), health (0.5% y/y), and shelter (-0.2%).

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