Financial market update

09 August 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: African Development Bank is proposing to raise funds from among Africa central banks and foreign reserves kept abroad, to finance development of infrastructure. The funds which will come in form of a bond, will be issued to central banks in exchange for five per cent of their foreign reserves. Disclosing the plan to newsmen, President of African Development Bank, Donald Kaberuka said the funds would be invested in viable infrastructure projects, offering member states good returns on investment.

US: Combined inventories of corn, wheat, soybeans and rice will drop 1.8 percent to a four-year low before harvests in 2013, the U.S. Department of Agriculture estimates. Crops in the U.S., the biggest exporter, are in the worst condition since 1988, heat waves are battering European crops and India’s monsoon rainfall already is 20 percent below normal. The International Grains Council began July by forecasting record harvests. It ended with a prediction for a 2 percent drop in output.

INDIA: Indian stocks advanced before earnings reports from Tata Motors Ltd. and Ranbaxy Laboratories Ltd. that may show quarterly profit rose. The BSE India Sensex added 0.5 percent to 17,680.11 at 9:48 a.m. in Mumbai on Wednesday, poised for its highest close since March 14. Stocks rose even as data yesterday will probably show India’s industrial output grew 0.3 percent in June from a year earlier, compared with a 2.4 percent expansion in May, according to a Bloomberg economist survey.

CHINA: Asian shares climbed for a fourth day yesterday as easing inflation in China fuelled speculation policy makers will do more to stimulate the economy. The MSCI Asia Pacific Index gained 0.9 percent. Chinese data showed consumer inflation slowed for a fourth month in July as retail sales and industrial production grew less than economists forecast.

Bonds – Bonds sold off across the curve as demand remained weak yesterday. Trading volumes have started to drop, however, we still expect some volatility across the curve as lending rates remain high and current negative carry trades.

Bills – Market remained volatile, with yields up another 30bps across board in Wednesday’s session. This sell-off, however, expected to slow down due to auction stop rates at surprisingly lower levels than market expectation and events in the cash market. Yields will still trend higher as liquidity remains tight and unstable.

Money Market – Cash market remained illiquid on Wednesday, O/N up another 800bps to 32% and OBB up 900bps to 30%, excess liquidity inflow of about ngn82 bio expected into the market tomorrow after auction funding.

                          Hi               Low             Close          Prev.Close
USD/NGN   161.50/60    159.70/80   160.00/10    161.48/58

NIBOR (%)                     LIBOR (%)
O/N                 31.9333      USD 1 month        0.2403
7 Day               31.9083      USD 2 month       0.3348
30 Day            32.4167       USD 3 month       0.4368
60 Day            33.0750      USD 4 month       0.5429
90 Day            33.2500      USD 6 month       0.7207
USD 12 month      1.0465
Y/Y Consumer Inflation June 2012 :                12.9%
FX Reserves: 07 August 2012 (USD bn)          36.356
MPR                                                                         12.00%
Source: FMD and CBN

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