February 6, 2024/Coronation Research

Summary

• Opening market liquidity was reported at N366.3bn on Friday (05 February ‘24). Call, overnight, and repo rates closed within a range of 7% – 22% as rates in the money market moderated following inflows from the FGN bond coupon payments and CRR refunds. Our expectation in the current week is that money market rates trend upward as the expected outflow from NTB issuance would likely outweigh the expected inflow from NTB maturities.
• Last week, the average NTB yield increased by +300bps to close at 9.7% w/w.
• The average yield for OMO bills increased by +120bps to close at 9.6% w/w. In the secondary market for FGN bonds, the average yield increased by +100bps to close at 14.8% w/w. In the latest FGN bond auction, the DMO offered N360bn but raised N418.2bn worth of instruments through re-openings of the 16.29% FGN MAR 2027, 14.55% FGN APR 2029, 14.70%FGN JUN 2033, 15.45% FGN JUN 2033, 15.45% FGN JUN 2038. The demand at this auction primarily reflects system liquidity triggered by FAAC allocation and coupon payments.
• In the Eurobond market, the average yield declined by -10bps to close at 9.9% w/w.
• At its latest policy meeting, the US FOMC kept the Fed funds rate unchanged at 5.25% – 5.5%. The committee pushed back against market expectations of rate cuts in March ’23, stating that rates a likely to remain elevated until they have gained greater confidence that inflation (currently 3.4% y/y) is moving sustainably toward the 2% target. Looking ahead, the committee stated that it would be prepared to adjust the stance of monetary policy if risks that could impede the attainment of its goals emerge.
• According to S&P Global, UK manufacturing PMI increased marginally to 47.0 in January ’24 from 46.20 recorded in December “23. This can be partly attributed to a contraction in factory activity as companies reported low output due to disrupted supply chain amid the crisis in the Red Sea which forced input deliveries to be diverted from the Suez Canal. Despite these difficulties, UK manufacturers remained optimistic, with business sentiment reaching a fourmonth peak. Meanwhile, services PMI increased to 54.3 in January ’24 from 53.4 in December ’23.

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