November 23, 2022/Coronation Research

Summary

• Opening market liquidity was reported at -N159.0bn on Friday (18 November ‘22). Call, overnight and repo rates closed within a range of 7%-13%, as system liquidity tightened on the back of an FGN bond and fx auctions. This week, we expect rates in the money market to remain elevated as the projected outflow from OMO and fx auctions as well as a possible CRR debit by the CBN, would likely outweigh potential inflow from a potential fx refund, OMO maturity, and FGN coupon payment.
• The average NTB yield remained unchanged w/w to close at 10.6%. 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 declined by -8bps to close at 14.4% w/w. At the latest primary market FGN Bond auction, the DMO offered N225bn but allotted N269.1bn worth of instruments through the re-openings of the 14.53% FGN Apr 2029 (14.75%; previously 16.0%). The improvement in participation (demand) at this bond auction primarily reflects improved system liquidity and end-year rebalancing/portfolio build-up by fund managers. At the Eurobond market, the average yield increased by +49bps to close at 11.9% w/w.
• According to Eurostat, Eurozone inflation moderated slightly to 10.6%y/y in October ’22 compared with 10.7% y/y in September ’22. Inflationary pressure was significant in energy (41.5% y/y), food, alcohol, and tobacco (13.1% y/y), non-energy industrial goods (6.1% y/y), and services (4.3% y/y). The ECB raised its 3 key interest rates by 75bps at its October meeting and disclosed that its future policy rate decisions will remain data-dependent.
• Meanwhile, the Eurozone GDP grew slightly to 2.1% y/y in Q3 ’22 vs 4.3% y/y recorded in Q2 ’22. This marks the sixth consecutive quarter of expansion, but the softest in the sequence. Looking ahead, growth in the Eurozone is expected to contract in Q4 ’22 due to the ongoing energy crisis and monetary policy tightening.

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