April 28, 2023/Coronation Research

Summary

• Opening market liquidity was reported at -N430m on Thursday (20 April 23). Call, overnight, and repo rates closed within a range of 5% – 19% as system liquidity tightened on the back of an FGN bond auction and CRR debit by the CBN. This week, we expect rates in the money market to moderate as the expected inflows from an fx refund, NTB maturity, FGN bond maturity, and coupon payment would likely outweigh potential outflows from an NTB and OMO auction as well as a potential CRR debit.
• The average NTB yield declined by -3bps to close at 8.9% w/w. Meanwhile, the OMO yield remained unchanged to close at 4% w/w.
• As for the secondary market for FGN bonds, the average yield increased by +13bps to close at 13.9% w/w. At the last primary FGN bond auction, the DMO offered N360bn but allotted N368.7bn worth of instruments through re-openings of 13.98% FGN Feb 2028, 12.50% FGN Apr 2032, 13.00% FGN Jan 2042, and 12.98% FGN Mar 2050.
• In the Eurobond market, the average yield increased by +28bps to close at 13.2% w/w.
• According to the Office of National Statistics, UK headline inflation moderated to 10.1% y/y in March ’23 vs 10.4% y/y recorded in February ’23. Although inflationary pressure moderated in restaurants and hotels (11.3% y/y) as well as in transport costs (0.8% y/y), it remained significant in the cost of housing and utilities (26.1% y/y), food and non-alcoholic beverages (19.1% y/y), miscellaneous goods and services (6.7% y/y), recreation and culture (4.6% y/y).
• Last week, the People’s Bank of China (PBoC) left its lending rates unchanged for the eighth consecutive month (since August ’22) to support economic recovery after its reopening. The 1-year and 5-year LPR remained unchanged at 3.65% and 4.30% respectively. We expect the hold stance to remain in the near-term as the Chinese government remains focused on boosting domestic demand.

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