November 23, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N68.7bn on Friday (17 November ‘23). Call, overnight, and repo rates closed within a range of 4% – 23% as rates in the money market tightened. Our expectation in the current week is that money market rates moderate slightly as the projected inflow from FGN bond coupon payments and NTB maturities are likely to outweigh the expected outflow from an NTB auction.
• Last week, the average NTB yield declined by -61bps to close at 12.8% w/w.  The average yield for OMO bills declined by -115bps w/w to close at 14.7%.
• In the Eurobond market, the average yield declined by -53bps to close at 11.0% w/w.
• Meanwhile, in the secondary market for FGN bonds, the average yield increased by +6bps to close at 15.7% w/w. At the latest FGN bond auction, the DMO offered N360bn but allotted N434.5bn 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) improved by +16.2% (marking the highest increase recorded since August ’23).
• According to the U.S Bureau of Statistics, headline inflation moderated to 3.2% y/y in October ‘23 vs 3.7% y/y recorded in September ’23. The moderation was significant in food (3.3% y/y vs 3.7% y/y), shelter (6.7% y/y vs 7.2% y/y), and new vehicles (1.9% y/y vs 2.5% y/y).
• UK inflation also moderated to 4.6% y/y in October ’23 compared with 6.7% y/y recorded in September ’23. This is the lowest headline inflation rate recorded since October ’21. It reflects the impact of the cooling effect of monetary policy tightening. The moderation was significant in the restaurants and hotels (7.5% y/y vs 8.6% y/y), clothing and footwear (6.2% y/y vs 6.9% y/y), housing and utilities (3.5% y/y vs 6.9% y/y), transport (0.5% y/y vs 0.7% y/y). If moderation in inflationary pressures across economies persists, this would signal potential policy rate cuts next year.

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