January 18, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N433.3bn on Friday (13 January ‘22). Call, overnight and repo rates closed within a range of 5% – 10%, as system liquidity moderated on the back of inflows from NTB maturity and CRR refund. This week, we expect rates in the money market to trend upwards as a potential CRR debit by the CBN could outweigh potential inflows from an FGN coupon payment.
• The average NTB yield declined by -9bps to close at 3.3% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N56.9bn worth of NTB to market participants. The stop rates changed across the three tenors; 91-day: 2.00% (previously 2.75%), 182-day: 4.33% (previously 7.15%), 364-day: 7.30% (previously 8.49%).
• Meanwhile, the average OMO yield remained unchanged w/w to close at 3.4% w/w.
• As for the secondary market for FGN bonds, the average yield increased by 10bps to close at 12.8% w/w.
• In the Eurobond market, the average yield declined by -115bps to close at 10.3% w/w.
• According to the US Bureau of Labor Statistics, headline inflation moderated to 6.5% y/y in December ’22 compared with 7.1% y/y recorded in November ’22. This marks the lowest headline inflation reading since October ’21 and the sixth consecutive moderation in headline inflation largely attributable to a decline in energy (7.3% y/y), gasoline (1.5% y/y) and food (10.5% y/y). However, inflationary pressure persisted in electricity (14.3% y/y), and shelter (7.5% y/y). Meanwhile, based on data from China’s National Bureau of Statistics, headline inflation increased to 1.8% y/y in December ’22 compared with 1.6% y/y recorded in November ’22. Although demand was sluggish due to a spike in COVID-19 infections, inflationary pressure was significant in food (4.8% y/y), transportation and communication (2.8% y/y), education and culture (1.4% y/y), health (0.6% y/y) and clothing (0.5% y/y). For the FY-2022, average inflation was 2% y/y, below the government’s target of 3% y/y.

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