October 23, 2023/Coronation Research
Summary
- Opening market liquidity was reported at N246.5bn on Friday (20 October ‘23). Call, overnight, and repo rates closed within a range of 1% – 5% as rates in the money market moderated marginally. This week, we expect rates in the money market to further moderate as the expected inflow from FGN bond coupon payments and an NTB maturity would likely outweigh outflow from a scheduled NTB auction.
- The average NTB yield increased by +40bps to close at 6.9% w/w. Meanwhile, the average yield for OMO bills declined by -3bps w/w to close at 12.1%.
- As for the secondary market for FGN bonds, the average yield declined by -1bps to close at 14.5% w/w. At the latest FGN bond auction held last week, the DMO offered N360bn but allotted N334.8bn 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) increased by +37.1% m/m, reflective of slightly better system liquidity.
- In the Eurobond market, the average yield increased by +77bps to close at 12.8% w/w.
- According to China’s National Bureau of Statistics, China’s GDP grew by 4.9% y/y in Q3 ‘23 compared with 6.3% y/y recorded in Q2 ’23. The slowdown in growth is reflective of weak consumption patterns, the downturn in the property sector as well as weaker trade volumes.
- According to the UK Office of National Statistics, inflation in the United Kingdom remained unchanged to close at 6.7% y/y in September ’23. Inflationary pressure moderated for food and non-alcoholic beverages (12.1% y/y vs 13.6% y/y) as well as furniture and household goods (3.7% y/y vs 5.1% y/y). Looking ahead, the Bank of England (BOE) may hike its policy rate (we suspect at a slower pace) as inflation remains well above target.
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