June 27, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N613.3bn on Friday (23 June ‘23). Call, overnight, and repo rates closed within a range of 1% – 7% as system liquidity moderated on the back of the recent FAAC payout. This week, we expect rates in the money market to trend upwards as the projected outflow from an NTB and OMO auctions, as well as a potential CRR debit would outweigh the expected inflow from an NTB maturity.
• The average NTB yield increased by +17bps to close at 6.5% w/w.  
• As for the secondary market for FGN bonds, the average yield remained unchanged from the previous week to close at 13.8% w/w. At the last primary FGN bond auction, the DMO offered N360bn but allotted N427.7bn worth of instruments through the re-opening of the 14.55% FGN APR 2029, and new issuances of the 14.33% FGN JUN 2033, 15.45% FGN JUN 2025 and 15.70% FGN JUN 2053 FGN bonds. The relatively improved demand at this auction largely reflects improved system liquidity.
• In the Eurobond market, the average yield decreased by -30bps to close at 11.7% w/w.
• According to the Office of National Statistics, UK headline inflation remained unchanged at 8.7% y/y in May ’23. Inflationary pressure was significant in air travel (31.4% y/y), recreational and cultural goods and services (6.7% y/y), and second-hand cars (3.9% y/y). Meanwhile, inflation moderated in food (18.3% y/y vs 19% y/y).
• Last week, the Bank of England (BOE) raised its key policy interest rate by +50bps to 5% from 4.5% in its June ’23 meeting. This marks the 13th consecutive rate hike pushing interest rates to its highest level since 2008. According to the BOE, further hikes would be necessary to bring inflation to the 2% target.

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