April 4, 2023/Coronation Research
Summary
- Opening market liquidity was reported at -N345.7m on Friday (24 March 23). Call, overnight, and repo rates closed within a range of 7% – 19% as system liquidity tightened on the back of outflows from NTB and OMO auctions as well as a CRR debit by the CBN. This week, we expect the money market to remain elevated as the projected outflow from a potential CRR debit would likely outweigh the inflow from an OMO maturity.
- The average NTB yield increased by +194bps to close at 7.7% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N145.5bn worth of NTBs to market participants. The stop rates changed across the three tenors; 91-day: 6.00% (previously 2.55%), 182-day: 8.00% (previously 5.00%), 364-day: 14.74% (previously 9.49%). Meanwhile, the average OMO yield declined by -1bps to close at 4% w/w.
- As for the secondary market for FGN bonds, the average yield declined by -8bps to close at 13.2% w/w.
- In the Eurobond market, the average yield declined by -124bps to close at 12.4% w/w.
- According to the Office of National Statistics, UK headline inflation increased to 10.4% y/y in February ’23 vs 10.1% y/y recorded in January ’23. This marks the first increase in headline inflation in four months. Inflationary pressure was significant in the cost of food and non-alcoholic beverages (18% y/y), restaurants and hotels (12.1% y/y), clothing and footwear (8.1% y/y), and health (6.8% y/y). Meanwhile, inflation moderated in transport costs (2.9% y/y), furniture (8.7% y/y), housing and utilities (26.6% y/y), and recreation and culture (4.0% y/y).
- Meanwhile, according to S&P Global, UK manufacturing PMI declined to 47.9 in March ’23 from 49.2 recorded in February “23. This marks the eighth consecutive contraction in factory activity as companies reported low output due to weakened purchases by customers. Additionally, services and composite PMI declined to 52.8 and 52.2 respectively in March ’23. This can be partly attributed to the impact of rising inflation on consumer spending and recession concerns on the back of monetary policy tightening by the BOE.
For the full Coronation fixed income and exchange rate (CFEX) update, please click here