Financial market update

07 December 2012, Sweetcrude, Lagos – Local and international financial market update.
Nigeria – Central Bank of Nigeria (CBN) governor, Sanusi Lamido Sanusi, on Wednesday rose in defense of his fiscal tightening stance, saying that the apex bank was extremely committed to defending the economy. Sanusi said the tightening measures were adopted to defend the naira, create price stability and build reserves, as he argued that the hazards of lowering the rates at this time, were much weightier than the gains thereof.

USA – A decision by the FED to expand its bond buying next week is likely to prompt policy makers to rewrite their 18 month old blueprint for an exit from record monetary stimulus. Under the exit strategy the FED would start selling bonds in mind 2015 in a bid to return its holdings to pre crisis levels over 2 to 3 yrs. The FED is currently buying USD40bn a month in mortgage backed securities to boost the economy. At the next policy makers meeting for 11-12 Dec they are debating if this should be increased to USD45bn per month.

EUROPE – Greece will need to start buying its own debt back via state controlled banks and pension funds to reach EU imposed targets crucial to release the next tranche of bailout funds. Greece is offering to purchase EUR29bn of bonds maturing between 2023-2042 at an average of 33.1% of face value. This shuffling of debt between the Greek state and state owned banks for some in the market makes no difference to any properly defined measure of sustainability.

Bonds – Yields continue their steady drop again in the markets on Thursday, spurred by a drop in rates at the primary bill auction, by year end we might be set for yields dipping below the 12.00% levels. The auction circular for December will soon be available though the expectation is between 60-90billion in terms of issuance size across the 5, 7 &10 year.

Bills – Quite a volatile session on Thursday in the markets as the auction results caught a lot of market players off guard with the cuts offs coming in lower than most expected. The short end around 91 days was sold with the bill auctioned yesterday trading up 75bps while the longer dated maturities 182 and above traded significantly lower.

Money Market – OBB and unsecured O/N rates dipped to settle at 10.75% and 11.00% as the market remains liquid.

Indicative Currency Exchange Rates
                          Bid              Offer
EURUSD        1.2968           1.2978
GBPUSD        1.6054            1.6064
USDJPY         82.46             82.86
USDCHF        0.9321           0.9341
GBPEUR        1.2378            1.2388
USDZAR        8.6839           8.7839
USDNGN       156.97            157.47
JPYNGN        1.9036            1.9536
CHFNGN       168.40           172.40
EURNGN       203.56           207.56
GBPNGN        252.00          256.00
ZARNGN        18.08             20.08

Oil fell after ECB cut its forecast growth and US regulators not able to reach an agreement on budget plan. WTI was at $86.36/bbl (+$0.10) and Brent fell $1.78 to $107.03/bbl which bring the WTI-Brent benchmark premium to the narrowest level at $20.77 since October 19.

Interest rates
NIBOR (%)                         LIBOR (%)

O/N              11.1250             USD 1 month           0.2130
7 Day            11.8750            USD 2 month           0.2580
30 Day         12.7917             USD 3 month           0.3105
60 Day         13.3750            USD 6 month           0.5240
90 Day         13.9583            USD 12 month         0.8550
Y/Y Consumer Inflation October 2012 :                 11.70%
FX Reserves: 30 November 2012 (USD bn)          44.47
MPR                                                                               12.00%
Source: Reuters Guardian, Bloomberg, Central Bank of Nigeria,
Financial Market Dealers Association Standard Chartered Bank Nigeria

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