January 30, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N1.2trn on Friday (27 January ‘22). Call, overnight and repo rates closed within a range of 5% – 11%, as system liquidity moderated marginally on the back of FAAC payouts. This week, we expect rates in the money market to trend upwards as the projected outflows from an FGN Bond auction, as well as a potential CRR debit by the CBN would likely outweigh inflows from an fx refund.
• The average NTB yield declined by -200bps to close at 1.4% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N250.5bn worth of NTBs to market participants. The stop rates changed across the three tenors; 91-day: 0.29% (previously 2.00%), 182-day: 1.80% (previously 4.33%), 364-day: 4.78% (previously 7.30%).
• Meanwhile, the average OMO yield remained unchanged close at 2.9% w/w.
• As for the secondary market for FGN bonds, the average yield declined by -31bps to close at 13.1% w/w.
• In the Eurobond market, the average yield increased by +48bps to close at 10.9% w/w.
• The People’s Bank of China (PBoC) in its January meeting left its key lending rates unchanged for the fifth consecutive month (since September ’22). The 1-year and 5-year LPR remained unchanged at 3.65% and 4.3% respectively. According to the PBoC, measures targeted at supporting manufacturers and small companies would be prioritized in the interim in a bid to boost economic growth amid repeated covid-19 outbreaks. We note that China relaxed its stringent zero-covid policy last year on the back of protests in select cities.
• Meanwhile, based on preliminary estimates from the U.S Bureau of Economic Analysis, the U.S GDP grew by 2.9% y/y in Q4 ’22 from 3.2% y/y recorded in the preceding quarter.

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