September 18, 2023/Coronation Research
For the full Coronation fixed income and exchange rate (CFEX) update, please click here
Summary
- Opening market liquidity was reported at -N317.7bn on Friday (15 September ‘23). Call, overnight, and repo rates closed within a range of 5% – 25% as rates in the money market tightened. This week, we expect rates in the money market to moderate on the back of inflows from FGN bond coupon payments.
- The average NTB yield increased by +5bps to close at 8% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered and allotted N152.2bn worth of NTBs to market participants. The stop rates changed across two out of three tenors; 91-day: 6.5% (previously 4.5%), 182-day: 7.00%, 364-day: 12.98% (previously 12.55% y/y.
- Meanwhile, the average yield for OMO bills decreased by -2bps w/w to close at 13.3%.
- As for the secondary market for FGN bonds, the average yield increased by +23bps to close at 14.4% w/w. At the latest FGN bond auction, the DMO offered N360bn but allotted N251.5bn worth of instruments through the re-opening of the 14.55% FGN APR 2029, 14.70% FGN June 2033, 15.45% FGN JUN 2038 and 15.70% FGN JUN 2053. The participation level (demand) declined by -6.9% m/m and can be partly attributed to tight system liquidity.
- In the Eurobond market, the average yield increased by +2bps to close at 11.2% w/w.
- According to the US Bureau of Labor Statistics, headline inflation increased to 3.7% y/y in August ’23 compared with 3.2% recorded in July ’23. Inflationary pressure was significant in the cost of transportation (10.3% y/y vs 9% y/y). Meanwhile, inflation moderated for food (4.3% y/y vs 4.9% y/y), apparel (3.1% y/y vs 3.2 y/y) and shelter (7.3% y/y vs 7.7% y/y).
