February 16, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N400.5m on Friday (10 February ’23). Call, overnight and repo rates closed within a range of 5% – 12%, as system liquidity tightened on the back of an NTB auction as well as CRR debits by the CBN. This week, we expect rates in the money market to remain elevated as the projected outflows from an fx and FGN bond auction, as well as a potential debit by the CBN would likely outweigh inflows from an fx refund and OMO maturity.
• The average NTB yield declined by -10bps to close at 1.5% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N220.5bn worth of NTB 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 declined by -68bps to close at 1.3% w/w. 
• As for the secondary market for FGN bonds, the average yield declined by -17bps to close at 13.1% w/w. 
• In the Eurobond market, the average yield increased by +37bps to close at 12.4% w/w. 
• According to Eurostat, Eurozone inflation moderated to 8.5% y/y in January ’23 compared with 9.2% y/y recorded in December ’22. This is the third consecutive moderation in headline inflation. The moderation was evident in fuel (17.2% y/y vs 25.5% y/y), services (4.2% y/y). Meanwhile, inflationary pressure was persistent in food, alcohol and tobacco (14.1% y/y), non-energy industrial goods (6.9% y/y). 
• Eurozone Manufacturing PMI increased to 48.8 in January ’23 from 47.8 recorded in December ’22. Services PMI increased marginally to 50.8 in January ’23 from 50.7 recorded in December ’22. Overall, the composite PMI increased to 50.3 in January ’23 from 49.3 in December ’22. Looking ahead, GDP growth in the Eurozone is expected to be subdued due to the spill-over effects of the Russia-Ukraine crisis and the impact of monetary policy rate hikes. 

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