May 30, 2023/Coronation Research
Summary
- Opening market liquidity was reported at N278.4bn on Friday (26 May 23). Call, overnight, and repo rates closed within a range of 4% – 14% as system liquidity improved due to inflow from FAAC payout and an NTB maturity. This week, we expect rates in the money market to trend upwards as the projected outflow from a potential CRR debit by the CBN would likely outweigh the expected inflow from an OMO maturity and fx refund.
- The average NTB yield decreased by -18ps to close at 6.8% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N180.4bn worth of NTBs to market participants. The stop rates changed across the three tenors; 91-day: 2.29% (previously 4.50%), 182-day: 4.99% (previously 6.44%), 364-day: 7.99% (previously 8.99%).
- As for the secondary market for FGN bonds, the average yield decreased by -8bps to close at 13.9% w/w.
- In the Eurobond market, the average yield decreased by -56bps to close at 12.1% w/w.
- According to the Office of National Statistics, UK headline inflation moderated to 8.7% y/y in April ’23 vs 10.1% y/y recorded in March ’23. This marks the lowest headline inflation reading since March ’22 and can be largely attributed to a slowdown in energy prices. The moderation was significant in housing and utilities (12.3% y/y), restaurants and hotels (10.2% y/y), furniture, household equipment, and maintenance (7.5% y/y), food and non-alcoholic beverages (19.0% y/y). Meanwhile, inflationary pressure persisted in miscellaneous goods and services (6.8% y/y), recreation and culture (6.3% y/y), and transport (1.5% y/y). Headline inflation remains significantly higher than the Bank of England’s inflation target of 2%.
- Meanwhile, according to S&P Global, UK manufacturing PMI decreased to 46.9 in May ’23 from 47.8 in April ’23. This marks the lowest factory activity reading in five months, as companies reported declining output and purchases by customers.
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