Financial market update

15 November 2011, Sweetcrude, Lagos – International and local financial market update:
· EUROPE – The euro declined for a second day before a report forecast to show German investor confidence fell to a three year low. The currency dropped against 10 of its 16 major counterparts as Spain prepares to sell up to EUR4 billion of bonds on Nov 17.

· JAPAN – The interest rates banks in Japan charge each other for three month loans may drop to the lowest level since 2006 on speculation the Central Bank of Japan will expand spending to books the economy. A rebound in the JPY after Japan sought to weaken it last month may spur the BOJ to consider alternatives to intervention such as further asset purchases

· CHINA: The International Monetary Fund called for China to expand oversight of banks as risks increase from off-balance sheet lending and a surge in property prices. Despite ongoing reform, China confronts a stead build-up of financial sector vulnerabilities said the IMF.

· The total non-performing loans in the banking industry has dropped to N688bn as at September 31, 2011, as against N2.51tn recorded before the special audit carried out by the CBN and the NDIC. in 2009.According to documents obtained by our correspondent from the NDIC, the ratio of non-performing loans to total credit stood at 9.13% in September, 2011, compared to 32% recorded in 2009.It also revealed that total insider credits stood at N559.58bn, while non-performing insider credits were N21.19bn in September, 2011

· Bonds –
Ahead of the auction, a slight sell off would have been expected this week and while that happened on the 2 & 3yr the demand on the 5yr and 20yr was sustained yesterday day keeping up the downward pressure on yields.

· Bills –
An early sell off yesterday as the CBN came out with an OMO offering so some players tried to switch for higher yields. There was a sharp retracement however yields still closed above the open. The 129 day bill cut at 15.8999% and the 136 day bill at 16.00%.

offered and sold $250mio against a demand of $694mio, lowest intervention rate 156.0450(1% inclusive),depreciation of 1.69naira from the last auction.

NIBOR%                         LIBOR (%)
O/N           13.62500      USD 1 month         0.25020
7 Day         14.12500      USD 2 month         0.35070
30 Day      15.12500       USD 3 month         0.46060
60 Day      15.58330      USD 6 month          0.66220
90 Day      16.04170      USD 12 month        0.98520
Y/Y Consumer Inflation Sep 2011 :                 10.30%
FX Reserves: 10 November 2011            USD33.06bn
MPR                                                                       12.00%
Source: FMD and CBN

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