March 31, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N-404.6m on Friday (24 March 23). Call, overnight, and repo rates closed within a range of 14% – 19% as system liquidity tightened on the back of outflows from NTB and OMO auctions as well as CRR debit by the CBN. This week, we expect rates in the money market to moderate as the projected inflows from NTB and OMO maturities, an fx refund, and an expected FAAC payout would likely outweigh outflows from NTB and OMO auctions as well as a potential CRR debit by the CBN.
• The average NTB yield increased by +44bps to close at 5.8% w/w. Meanwhile, the average OMO yield increased by +101bps to close at 4.0% w/w.
• As for the secondary market for FGN bonds, the average yield declined by -8bps to close at 13.2% w/w. At the last primary FGN bond auction, the DMO offered N360bn but allotted N563.2bn worth of instruments through re-openings of 13.98% FGN Feb 2028, 12.50% FGN Apr 2032, 16.25% FGN Apr 2037 and 14.80% Apr 2049.
• In the Eurobond market, the average yield decreased by -4bps to close at 13.6% w/w.
• Last week, the FOMC voted unanimously to raise its key policy rate by 25bps to 4.75%-5.00%. This pushed borrowing costs to its highest level since 2007, as inflation remains elevated (Feb ’23; 6.0% y/y). Looking ahead, amid concerns around the US banking sector, the committee stated that before determining the magnitude of future rate hikes, it would continue to assess the impact of previous rate hikes as well as other economic and financial developments. Further tightening is likely, given the need to tame inflation.

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