November 28, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N308.3bn on Friday (25 November ‘22). Call, overnight and repo rates closed within a range of 8%-13% as system liquidity improved on the back of inflows from FAAC allocation and OMO maturity. This week, we expect rates in the money market to trend upwards, as the projected outflow from a possible CRR debit would likely outweigh the potential inflow from an OMO maturity and an FGN coupon payment.
• The average NTB yield increased by +5bps w/w to close at 10.7%. 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 marginally by 1bps to close at 14.4% w/w. At the Eurobond market, the average yield declined by -28bps to close at 11.6% w/w.
• According to the Office of National Statistics, UK headline inflation rose to 11.1% y/y in October ’22 vs 10.1% y/y recorded in September ’22. This marks the highest headline inflation rate recorded since October ’81 and is significantly higher than the Bank of England’s target of 2%. Inflationary pressure was significant in gas (128.9%), electricity (65.7%), housing, and household services (26.6% y/y), and food and non-alcoholic beverages (16.2%).
• Meanwhile, the UK economy grew by 2.4% y/y in Q3 ’22 vs 4.4% y/y recorded in Q2 ’22. The moderation in growth reflects the impact of the ongoing energy and cost of living crisis as well as monetary policy tightening. The IMF has trimmed its growth forecast for the UK from 0.5% y/y to 0.3% y/y, as inflation and higher taxes reduce purchasing power, and tighter monetary policy takes a toll on consumer spending and business investment.

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