March 19, 2024/Coronation Research

Summary

• Opening market liquidity was reported at N1.3trn on Friday (15, March ‘24). Call, overnight, and repo rates closed within a range of 5% – 32% as rates in the money market tightened. Our expectation in the current week is that money market rates trend upward as the expected outflow from the monthly FGN bond auction would likely outweigh the expected inflow from FGN bond coupon payments.
• Last week, the average NTB yield declined by -18bps to close at 18.6% w/w. At the latest primary market NTB auction held last week, the CBN offered and allotted N161.4bn worth of NTBs to market participants. The stop rates decreased across the three tenors; 91-day: 16.2% (previously 17.2%), 182-day: 17.0% (previously 18.0%), 364-day: 21.1% (previously 21.4% y/y).
• The average yield for OMO bills decreased by -4bps to close at 18.8% w/w.
• As for the secondary market for FGN bonds, the average yield increased by +39bps to close at 18.4% w/w.
• In the Eurobond market, the average yield increased by +37bps to close at 10.1% w/w.
• According to the US Bureau of Labor Statistics, U.S. inflation increased to 3.2% y/y in February ’24 from 3.1% y/y recorded in January ’24. This can be partly attributed to a slight uptick in transportation costs by +9.9% y/y vs +9.5% y/y, in contrast to the steady declines recorded in energy (-1.9% y/y vs -4.6% y/y), food (-2.2% y/y vs -2.6% y/y), shelter (+5.7% y/y vs +6% y/y) and medical care (+2.9% y/y vs +3.0% y/y). At the last FOMC meeting, the committee stated that it would continue to assess incoming data, the evolving outlook, and balance risks before making adjustments to the fed funds rate, as headline inflation remains above target
• According to China’s Bureau of Statistics, China recorded a headline inflation of 0.7% y/y in February ’24 compared with a deflation of -0.8% y/y recorded in January ‘24. Non-food inflation increased by 1.1% y/y vs 0.4% y/y, health increased by 1.5% y/y vs 1.3% y/y and education increased by 3.9% y/y vs 1.3% y/y. However, food prices declined by -0.9% y/y vs -5.9% y/y. The latest inflation figure marks China’s exit from its  7– 7-month deflationary trend. This can be partly attributed to robust spending during the Lunar New year holiday.

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