Coronation Fixed Income and Exchange Rate (CFEX) Update

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Opening market liquidity was reported at N113.2bn on Friday (05 Nov ‘21). Overnight and repo rates closed within a range of 12.0-14.5%. Last week, the average NTB yield declined by 15bps w/w to close at 5.3%. This is due to increased demand as local banks reinvested funds from OMO maturities earlier in the week. Meanwhile, the average yield for OMO bills decreased by 28bps w/w to close at 6.1%.

As for the secondary market for FGN bonds, the average yield increased by 3bps w/w to close at 11.3%. We note that investors focused on the longer end of the curve.

Last week, the US Federal Open Market Committee (FOMC) voted unanimously to maintain the key policy rate in a target range of 0.00% – 0.25%. We understand that the Federal Reserve will begin tapering the pace of its asset purchases later this month. On a monthly basis, the reduction will see USD10bn less in treasuries and USD5bn less in mortgage-backed securities. The committee is still prepared to adjust the pace of purchases if changes in the economic outlook tilt towards negative.

According to the US Department of Labour, the US nonfarm payroll rose for the ninth consecutive month by a total of 531,000 in October compared with 194,000 recorded in September. The unemployment rate declined to 4.6%, compared with 4.8% in September. This was driven by increased employment in the services sector.   
For the full Coronation fixed income and exchange rate (CFEX) update, please click here

SOURCE Chinwe Egwim, Chief Economist, Coronation Merchant Bank, Nigeria

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