February 27, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N717.6m on Friday (24 February 23). Call, overnight and repo rates closed within a range of 6% – 11%, as system liquidity improved on the back of inflows from OMO and NTB maturities, as well as FAAC payouts and FGN coupon payments. This week, we expect rates in the money market to trend upwards as the projected outflows from an fx auction and a potential CRR debit by the CBN would likely outweigh inflows from an OMO maturity.
• The average NTB yield declined by -4bps to close at 3.9% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N263.5bn worth of NTB to market participants. The stop rates changed across the three tenors; 91-day: 3.00% (previously 0.29%), 182-day: 3.24% (previously 1.80%), 364-day: 9.90% (previously 4.78%). Meanwhile, the average OMO yield remained unchanged at 3.8% w/w.
• As for the secondary market for FGN bonds, the average yield declined by -12bps to close at 13.1% w/w.
• In the Eurobond market, the average yield declined by -30bps to close at 12% w/w.
• According to the Office of National Statistics, UK headline inflation moderated to 10.1% y/y in January ’23 vs 10.5% y/y recorded in December ’22. This marks the third consecutive moderation in headline inflation. The moderation was significant in transport costs (3.1% y/y), clothing and footwear (6.2% y/y), furniture (9.2% y/y), restaurants and hotels (10.8% y/y) and food and non-alcoholic beverages (16.7% y/y). Meanwhile, inflationary pressures persisted in recreation and culture (5.0% y/y), alcoholic beverages and tobacco (5.1% y/y), health (6.3% y/y) and housing and utilities (26.7% 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 increased to 49.2 in February ’23 from 47 in January ’23. This marks the highest factory activity reading in seven months as companies reported increased output and purchases by customers.

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