December 12, 2023/Coronation Research

Summary

• Opening market liquidity was reported at N196.9bn on Friday (08 November ‘23). Call, overnight, and repo rates closed within a range of 6% – 20% as rates in the money market tightened. Our expectation in the current week is that money market rates trend upwards as the projected outflow from NTB and FGN bond auctions are likely to outweigh inflow from an NTB maturity.
• Last week, the average NTB yield declined by -30bps to close at 10.2% w/w. At the latest primary market NTB auction held last week Wednesday, the CBN offered N104.4bn and allotted N604.4bn worth of NTBs to market participants. The stop rates increased across the three tenors; 91-day: 9.00% (previously 4.5%), 182-day: 13.00% (previously 7.0%), 364-day: 15.75% (previously 12.55% y/y).
• Meanwhile, the average yield for OMO bills remained unchanged to close at 14.6% w/w.
• In the secondary market for FGN bonds, the average yield increased by +3bps to close at 15.7% w/w
• As for the Eurobond market, the average yield declined by -6bps to close at 10.6% w/w.
• According to China’s National Bureau of Statistics, headline inflation recorded a deflation of   -0.5% y/y in November ’23 compared with -0.2% y/y recorded in October ’23. This marks the fastest decline recorded since November ‘23 and can be partly attributed to weakened consumption patterns. The deflation was largely significant in food prices (-4.2% y/y vs -4.0% y/y) amid a further fall in pork prices, and transport (-2.4% y/y vs -0.9% y/y). Overall, non-food prices moderated to (0.4% y/y vs 0.7% y/y).
• According to S&P Global, US Manufacturing PMI declined to 49.4 in November ’23 compared with 50 in October ‘23. This marks the lowest reading since August ’23  and can be partly attributed to sluggish demand. Meanwhile, Service PMI rose marginally to 50.8 in November ’23 vs 50.6 in October ’23. Overall, the Composite PMI remained unchanged at 50.7. Looking ahead, business expectations signal subdued growth in early 2024.

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