June 6, 2023/Coronation Research
Summary
- Opening market liquidity was reported at N230.1bn on Friday (02 June 23). Call, overnight, and repo rates closed within a range of 4% – 12% as system liquidity improved. This week, we expect rates in the money market to trend upwards as the projected outflow from an NTB and fx auction, as well as a potential CRR debit by the CBN would likely outweigh expected inflow from an NTB maturity and fx refund.
- The average NTB yield decreased by -44ps to close at 6.4% w/w.
- As for the secondary market for FGN bonds, the average yield decreased by -10bps to close at 13.8% w/w
- In the Eurobond market, the average yield decreased by -69bps to close at 11.4% w/w.
- According to Eurostat, Eurozone inflation moderated to 6.1% y/y in May ’23 compared with 7% y/y recorded in April ’23. This marks the lowest headline inflation reading since February ’22 and can be largely attributed to a moderation in the cost of food, alcohol, and tobacco (12.5% y/y), non-energy industrial goods (5.8% y/y), services (5.0% y/y) as well as energy prices (1.7% y/y). Inflation in the Eurozone remains above the ECB’s 2% target signaling the possibility of future rate hikes to curb inflationary pressures. Meanwhile, based on data from China’s National Bureau of Statistics, headline inflation moderated to 0.1% y/y in April ‘23 compared with 0.7% y/y recorded in March ’23. The moderation was significant in food (0.4% y/y), and non-food prices (0.1% y/y). However, Inflationary pressure was persistent in education (1.9% y/y vs 1.4% y/y).
- OPEC+ recently agreed to trim oil production by an additional 1.4mbpd, resulting in an oil production level of 40.4mbpd from January ’24. Over the past year, OPEC+ has announced cuts totaling 3.6mbpd, (i.e., 2mbpd last year and voluntary cuts of 1.66mbpd in April ’23). To an extent, these cuts may appear ineffective given that select member countries are struggling to meet their revised production targets. For instance, Nigeria’s production quota has been reduced to 1.38mbpd for 2024 compared with an average of 1.4mpd in the first half of 2023.
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