February 28, 2024/Coronation Research

Summary

• Opening market liquidity was reported at N1.4trn on Friday (23 February ‘24). Call, overnight, and repo rates closed within a range of 7% – 26% as rates in the money market tightened. Our expectation in the current week is that money market rates moderate as the expected inflow from FAAC allocation would likely outweigh the outflow from potential CRR debits.
• Last week, the average NTB yield increased by +120bps to close at 16.7% w/w while the average yield for OMO bills remained unchanged to close at 17.8% w/w. At the latest primary market NTB auction held on Wednesday, the CBN offered N265.5bn, but allotted N1.5trn worth of NTBs to market participants. The stop rates moderated in two of the three tenors; 91-day: 17% (previously 17.24%), 182-day: 17.50% (previously 18%), 364-day: 19%.
• As for the secondary market for FGN bonds, the average yield increased by +70bps to close at 16.8% w/w. In the latest FGN bond auction, the DMO offered N2.5trn but raised N1.5trn worth of instruments through the new issuance of 18.50% FGN FEB 2031, and 19.00% FGN FEB 2034.
• In the Eurobond market, the average yield increased by +20bps to close at 9.9% w/w.
• The Eurozone headline inflation declined marginally to 2.8% y/y in January ’24 compared with 2.9% y/y recorded in December ’24. It is worth highlighting that Inflation moderated for food, alcohol, and tobacco (5.6% vs 6.1%), and non-energy industrial goods (2.0% vs 2.5%)
• The PBoC in its February ’24 meeting reduced its 5-year loan prime rate by -25bps to 3.95% (previously 4.20%). This marks the first rate cut since June 2023. This monetary policy easing was reflective of government efforts to boost investment and ease pressure in the property sector. Meanwhile, the bank maintained the 1-year rate at 3.45%.

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