January 9, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N1.3trn on Friday (06 January ‘22). Call, overnight and repo rates closed within a range of 5% – 15%, as system liquidity tightened on the back of outflows from OMO and fx auctions. This week, we expect rates in the money market to remain elevated as the projected outflow from an NTB, OMO, and fx auctions, as well as a potential CRR debit by the CBN would likely outweigh potential inflows from NTB maturity.
• The average NTB yield declined by -197bps to close at 3.4% w/w. Meanwhile, the average OMO yield remained unchanged w/w to close at 3.4%.
• As for the secondary market for FGN bonds, the average yield declined by -36bps to close at 12.7% w/w.
• In the Eurobond market, the average yield declined by -42bps to close at 11.5% w/w.
• According to Eurostat, Eurozone inflation moderated to 9.2% y/y in December ’22 compared with 10% y/y recorded in November ’22. This moderation marks the lowest headline inflation reading in four months (since September ’22) and can be partly attributed to lower oil prices on the back of recession fears in advanced economies. The decline was largely evident in fuel (25.7% y/y vs 34.9% y/y). Meanwhile, inflationary pressure was persistent in food, alcohol and tobacco (13.8% y/y), non-energy industrial goods (6.4% y/y) and services (4.4% y/y).
• Eurozone Manufacturing PMI increased marginally to 47.8 in December ‘22 from 47.1 recorded in November ’22, as inflationary pressure eased. Business confidence improved amid concerns around elevated inflation, high energy costs and the probable risk of a recession. Meanwhile, services PMI increased to 49.8 in December ’22 from 48.6 in November ’22. Overall, the composite PMI increased to 49.3 in December ’22 from 47.8 in November ’22.

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