May 16, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N701.2bn on Friday (12 May 23). Call, overnight, and repo rates closed within a range of 5% – 13% as system liquidity tightened due to outflows from an NTB auction as well as a potential CRR debit by the CBN. This week, we expect system liquidity to be relatively tight as the projected outflow from an FGN bond auction and a potential CRR debit by the CBN would likely outweigh expected inflows from an fx refund and OMO maturity.
• The average NTB yield increased by +20bps to close at 7.5% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N143.9bn worth of NTBs to market participants. The stop rates changed across the three tenors; 91-day: 4.5% (previously 5.3%), 182-day: 6.44% (previously 8%), 364-day: 8.99% (previously 10.17%).
• As for the secondary market for FGN bonds, the average yield declined by -4bps to close at 14.1% w/w.
• In the Eurobond market, the average yield increased by +19bps to close at 13.1% w/w.
• According to the US Bureau of Labor Statistics, headline inflation moderated to 4.9% y/y in April ’23 vs 5% recorded in February ’23. This marks the lowest headline reading since April ’21. The moderation was evident in energy (-5.1% y/y), shelter (8.1% y/y), and food prices (7.7% y/y).
• Meanwhile, according to China’s Bureau of Statistics, China’s inflation moderated to 0.1% y/y in April ’23 compared with 0.7% y/y in March ’23. This marks the lowest headline inflation reading since March ’22. This moderation can be partly attributed to the slowdown in food (0.4% y/y vs 2.4% y/y). Meanwhile, inflationary pressure was persistent in education (1.9% y/y) and health (1.0% y/y).

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