January 26, 2023/Coronation Research
Summary
- Opening market liquidity was reported at N492.5bn on Friday (20 January ‘22). Call, overnight and repo rates closed within a range of 5% – 12%, as system liquidity tightened on the back of outflows from CRR debits. This week, we expect rates in the money market to moderate as projected inflows from a potential FAAC payout, NTB maturity, and FGN coupon payments could outweigh outflows from NTB and OMO auctions.
- The average NTB yield increased by +16bps to close at 3.5% w/w. Meanwhile, the average OMO yield declined by -48bps w/w to close at 2.9% w/w.
- As for the secondary market for FGN bonds, the average yield increased by 64bps to close at 13.4% w/w.
- In the Eurobond market, the average yield declined by -3bps to close at 10.3% w/w.
- According to the Office of National Statistics, UK headline inflation moderated to 10.5% y/y in December ’22 vs 10.7% y/y recorded in November ’22. This marks the second consecutive moderation in headline inflation and can be largely attributed to a decline in energy prices. The moderation was significant in transport costs (6.5% y/y), clothing and footwear (6.5% y/y), and recreation and culture (4.9% y/y). Meanwhile, inflationary pressures persisted in food and non-alcoholic beverages (16.8% y/y), restaurants and hotels (11.3% y/y). The headline inflation remains significantly higher than the Bank of England’s target of 2%.
- Meanwhile, according to S&P Global, UK manufacturing PMI declined to 45.3 in December ’22 from 46.5 in November ’22. This marks the slowest factory activity reading in almost three years (31 months) as companies reported lower output, reduced employment, and purchases by customers. Looking ahead, concerns still linger as recession concerns abound partly on the back of weaker consumer spending, as high energy prices and tighter financial conditions weigh on consumer confidence.
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