December 13, 2022/Coronation Research

Summary

• Opening market liquidity was reported at N187.7bn on Friday (09 December ‘22). Call, overnight and repo rates closed within a range of 5% – 15%, as system liquidity tightened on the back of an NTB and fx auction. This week, we expect rates in the money market to remain elevated as the projected outflow from an FGN Bond, OMO auctions, and a potential CRR debit by the CBN would likely outweigh potential inflows from a potential NTB maturity
• The average NTB yield declined by -252bps to close at 8.5% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered N54.4bn but allotted 104.4bn worth of NTB to market participants. The stop rates changed across the three tenors; 91-day: 6.49% (previously 6.50%), 182-day: 8.00% (previously 8.05%), 364-day: 13.05% (previously 14.84%). Meanwhile, the average yield for OMO bills declined by -2bps w/w to close at 10.1%.  
• As for the secondary market for FGN bonds, the average yield declined by -20bps to close at 14.1% w/w. In the Eurobond market, the average yield increased by +11bps to close at 11.7% w/w.
• According to China’s Bureau of Statistics, China’s inflation moderated to 1.6% y/y in November ’22 compared with 2.1% y/y in October ’22. This marks the lowest headline inflation reading since March ’22. This moderation can be partly attributed to the slowdown in food prices (due to government intervention), soft consumer demand and a decline in global oil price. Cost of food moderated to (3.7% y/y). Meanwhile, inflationary pressure was persistent in transportation and communication (2.9% y/y), education and culture (1.3% y/y) and clothing (0.5% y/y).
• China’s PMI declined to 47.1 in November ’22 from 49.0 recorded in October ’22 indicating the seventh consecutive decline in factory activity. Overall production activities in China continued to slow due to the surge in covid-19 cases in major cities. We note that the Chinese government recently announced the relaxation of its stringent zero-covid restrictions across select cities.

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