Financial market update

25 July 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: Nigeria’s central bank kept its benchmark interest rate at a record high and raised commercial banks’ reserve limits to help bolster the naira and control inflation. The Monetary Policy Committee left the policy rate at 12 percent, Governor Lamido Sanusi told reporters in the capital, Abuja yesterday. The MPC boosted borrowing costs by 5.75 percentage points last year to bolster the naira and help curb the cost of imports. Inflation in Africa’s top oil producer accelerated to 12.9 percent in June after the government partially removed a subsidy on gasoline in January, staying above the central bank’s target of 10 percent.

EUROPE: The euro area is ready to act to help Spain as the country’s borrowing costs soar, Luxembourg Finance Minister Luc Frieden said. While Frieden said no work is being done for a bailout of the Spanish government, policy makers in the 17-nation euro area must be prepared to move quickly. Spain’s benchmark 10-year bond yield reached a euro-era record of 7.625 percent yesterday as the nation’s borrowing costs rose at an auction amid concerns its banks’ and regions’ debts will force the government to seek a sovereign bailout.

US: U.S. stocks fell for a third day and commodities dropped as speculation increased that Greece may miss debt reduction targets. The Standard & Poor’s 500 Index sank 1.3 percent to 1,332.60 at 12:28 p.m. New York time yesterday. A report from Reuters citing European Union officials said Greece was seen missing targets for reducing debt.

INDIA: Indian stocks rose amid speculation the government will revive its economic reform agenda after gasoline prices were raised for the first time in two months. Indian Oil Corp. increased gasoline prices by 1 percent to 68.48 rupees ($1.2) per liter. The revision would help the finances of state refiners, which are forced to sell fuels at below-market rates. Prime Minister Manmohan Singh is under pressure to bolster an economy growing at the weakest pace in almost a decade as policy gridlock deters investment and Europe’s debt crisis hampers exports.

Bonds – Flat session on bonds with weakening demand across the curve just before the MPC announcement, with a hike in CRR we expect a sell-off on bonds in the coming sessions.

Bills – Light demand recorded on the 318dy – 337dy bills, zero demand expected in tomorrow’s session as banks adjust for new mandatory cash balances with the central bank. Auction holds tomorrow as we expect an illiquid trading session while market awaits new cut-off levels.

Money Market – OBB up another 75bps to 15.50% and O/N 50bps to 16.00% as liquidity level starts to drop in the cash market.

Hi             Low          Close           Prev.Close
    161.00/10    160.40/50   160.68/78    160.68/78


NIBOR (%)                             LIBOR (%)
O/N                  15.8333             USD 1 month           0.2442
7 Day                16.0000            USD 2 month          0.3358
30 Day             16.2500             USD 3 month          0.4481
60 Day             16.4583              USD 4 month          0.5481
90 Day             16.7083              USD 6 month          0.7264
USD 12 month        1.0615
Y/Y Consumer Inflation June 2012 :                           12.9%
FX Reserves: 23 July 2012 (USD bn)                           36.391
MPR                                                                                     12.00%
Source: FMD and CBN

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