April 17, 2023/Coronation Update

Summary

• Opening market liquidity was reported at -N203.2m on Friday (14 April 23). Call, overnight, and repo rates closed within a range of 6% – 19% as system liquidity tightened on the back of outflows from NTB and OMO auctions. This week, we expect the money market to tighten as the projected outflow from an FGN Bond auction and a potential CRR debit by the CBN would likely outweigh inflows from an FGN coupon payment.
• The average NTB yield increased by +106bps to close at 8.2% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered N149.6bn but allotted N279.3bn worth of NTBs to market participants. The stop rates remained unchanged across the three tenors; 91-day: 6.00%, 182-day: 8.00%, 364-day: 14.74%. Meanwhile, the OMO yield remained unchanged to close at 4.0% w/w.
• As for the secondary market for FGN bonds, the average yield increased by +4bps to close at 13.7% w/w.
• According to the US Bureau of Labor Statistics, headline inflation moderated to 5.0% y/y in March ’23 compared with 6.0% y/y recorded in February ’23. This marks the ninth consecutive moderation and signifies the lowest headline inflation reading (since May ’21). The moderation was significant in food prices (8.5% y/y) and energy (-6.4% y/y). However, inflationary pressure was significant in shelter (8.2% y/y).
• Meanwhile, China’s PMI declined to 50.0 in March ’23 from 51.6 in February ’23. This marks the third consecutive expansion in factory activity. The decline in manufacturing PMI highlighted growing concerns around the strength of the Chinese recovery. Additionally, services and composite PMI increased to 57.8 and 54.5 respectively in March ’23. Looking ahead, domestic demand is expected to be a major driver of economic growth.

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