Financial market update

20 September 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: The Central Bank of Nigeria (CBN) kept its monetary policy rate (MPR) on hold at 12% for the sixth time in a row yesterday, welcoming improved growth and a slight fall in headline inflation, but warning that core inflation remained stubbornly high. Analysts however see room for rate cuts by year end, which should lead to increased lending by banks. CBN governor, Sanusi Lamido Sanusi, said the MPC had decided to keep its cash reserve requirement (CRR) at 12%, adding that the bank would keep monetary conditions tight for now.

US: Federal Reserve Bank of Dallas President Richard Fisher said the central bank’s third round of bond purchases will probably fail to create jobs while risking higher inflation. Fisher, who doesn’t vote on monetary policy this year, opposed the Federal Open Market Committee decision last week to expand its holdings of long-term bonds with open-ended purchases of $40 billion of mortgage debt every month in a new round of quantitative easing. The Fed, led by Chairman Ben S. Bernanke, is seeking to boost growth and reduce 8.1 percent unemployment.

CHINA: A Chinese manufacturing survey pointed to an 11th month of contraction supporting the case for increased stimulus as Asia’s growth slows. Chinese Premier Wen Jiabao may need to roll out more stimulus to support growth that’s poised to slow for a seventh quarter after the Bank of Japan’s surprise decision yesterday to expand monetary easing. A dispute between China and Japan over islands claimed by both threatens to interfere with trade between the nations, adding to challenges for Asia as Europe’s debt crisis weighs on export demand.

INDIA: Indian stocks fell the most in two weeks after Prime Minister Manmohan Singh’s largest ally said it was exiting the coalition over reforms announced last week. The BSE India Sensitive Index, or Sensex, fell 0.5 percent to 18,401.51 at 10:59 a.m., headed for its biggest drop since Sept. 5.

Bonds – Fairly stable session yesterday due to monthly auction though some profit taking trades recorded. Results yet to be announced but definitely that will set the tone for yield direction into next week.

Bills – Initial rally on bills on Wednesday to react to the hold in MPR rate on Tuesday. Profit taking trades midday however reduced the impact which pushed yields back up to close just 25bps lower on the day. T-bill auction result printed at 12.00% – 91dy and 12.60% – 182dy, this will bring demand into the market today.

Money Market – OBB and ON rate up to 16.75% and 17.00% respectively, monthly statutory allocation yet to be disbursed.

AMOUNT SOLD – $ 177.09 MIO
CBN CUT- OFF RATE – $/NGN 155.78

                            Hi               Low          Close       Prev.Close
USD/NGN   157.70/80   157.37/47   157.70/80   157.50/60

Interest rates
NIBOR (%)                       LIBOR (%)
O/N             16.9167         USD 1 month          0.2185
7 Day           16.9167         USD 2 month          0.3003
30 Day        17.3333         USD 3 month          0.3758
60 Day        17.5833         USD 4 month          0.4754
90 Day        17.7500         USD 6 month          0.6594
USD 12 month         0.9875
Y/Y Consumer Inflation July 2012 :                  12.8%
FX Reserves: 14 September 2012 (USD bn)    40.568
MPR                                                                         12.00%
Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market
Dealers Association Standard Chartered Bank Nigeria

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