July 4, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N1.1trn on Friday (30 June 23). Call, overnight, and repo rates closed within a range of 1% – 5% as system liquidity improved. This week, we expect rates in the money market to trend upwards as the projected outflow from a potential CRR debit would likely outweigh expected inflow from an OMO maturity.
• The average NTB yield decreased by -11ps to close at 6.4% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N187.1bn worth of NTBs to market participants. The stop rates changed across the three tenors; 91-day: 2.87% (previously 4.89%), 182-day: 4.37% (previously 5.12%), 364-day: 6.23% (previously 8.24% y/y.
• As for the secondary market for FGN bonds, the average yield decreased by -80bps to close at 13.0% w/w.
• In the Eurobond market, the average yield increased by +118bps to close at 12.8% w/w.
• According to Eurostat, Eurozone inflation declined to 5.5% y/y in June ’23 compared with 6.1% y/y recorded in May ’23. This marks the lowest headline inflation reading since January ’22 and can be largely attributed to a decrease in the prices of food, alcohol, and tobacco (11.7% y/y vs 12.5% y/y), as well as non-energy industrial products (5.5% y/y vs 5.8 y/y). However, inflation persisted for energy (5.6% y/y vs -1.8% y/y) and services (5.4% y/y).
• Eurozone Manufacturing PMI declined to 43.4 in June ’23 from 44.8 recorded in May ’23. This is the steepest decline in factory activity since May ’20, as demand weakened due to persistent inflationary pressure. Services PMI also declined to 52.4 in June ’23 from 55.1 recorded in May ’23. Overall, the composite PMI declined to 50.3 from the recorded 52.8 in May ’23. Looking ahead, business confidence is expected to remain subdued partly due to the contractionary monetary policy stance of the ECB.

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