Financial market update

Financial markets20 August 2013, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: Nigeria’s inflation rate rose to 8.7 percent in July, climbing for the first time in three months, the National Bureau of Statistics said. According to the agency, the inflation rate advanced from 8.4 percent in June. That matched the median estimate of seven economists surveyed by Bloomberg News. Prices rose 0.5 percent in the month. The core inflation rate, which excludes agricultural products, rose 6.6 percent in July from a year earlier, up from 5.5 percent in June, the statistics office said. The CBN kept its policy rate at a record high of 12 percent for the 11th consecutive meeting in July to bolster the naira and control inflation, which has met the bank’s target of less than 10 percent all year. CBN Governor has forecast that the annual rate of price growth will stay within target through January because of the country’s monetary stance.

US: Stocks are expected to stumble ahead of US Federal Reserve notes due which will give a signal as to whether US plans to begin tapering their $85 billion-per-month bond buying program, analysts predicted. Analysts believe the Central Bank will begin to dismantle the program in September, which would hit stocks hard and lower prices, but would strengthen them long-term.

EUROPE: Bond strategists cutting their German yield forecast are betting the euro-region’s economy is too fragile to warrant 10-year rates of more than 2 percent. Germany’s 10-year borrowing cost jumped to a 16-month high of 1.92 percent yesterday as signs of an improving global economy fuelled speculation the Federal Reserve will trim its bond-buying program next month. While a report last week showed the euro area emerged from a record-long recession in the second quarter, Italy and Spain, the third- and fourth-largest economies, both contracted, while unemployment in the region is at a record high of 12.1 percent. Germany’s 10-year yield climbed to its highest since March 27, 2012 yesterday, after jumping 20 basis points last week, the most in almost two months.

CHINA: Yuan forwards fell the most this month as the central bank lowered the currency’s reference rate and on speculation the Federal Reserve will soon pare stimulus that has driven fund flows into emerging markets. The People’s Bank of China cut the daily fixing by 0.01 percent to 6.1697 per dollar today, following a 0.12 percent gain in the Bloomberg Dollar Index yesterday.

BONDS: With demand appearing weak after the rally in the last two weeks, the market continued the selloff yesterday, which started on Friday. Yields went up 20bps on average across the bond curve. As the liquidity in the money markets improves we might see yields rallying again before the close of the week.

BILLS: After a prolonged rally in the last two weeks, rates retraced a bit yesterday as inflation went up 30bps. As liquidity improves we expect to see demand return to the market.

MONEY MARKET: OBB and unsecured O/N rates 14.00% to close yesterday. Market opened down N48billion yesterday but as the market has the option of going to the CBN window, rates settled at the SLF rate. FAAC expected in at some point this week and this will improve the liquidity in the system.

CBN WDAS AUCTION: CBN offered $300 million and sold $258.32 million. Lowest intervention rate was $/N157.3176 (1% commission inclusive). 17 banks bid.

Indicative Currency Exchange Rates
Bid      Offer

EURUSD        1.3348    1.3398
GBPUSD         1.5651    1.5701
USDJPY          97.25      97.65
USDCHF        0.9227   0.9257
GBPEUR        1.1725    1.1735
USDZAR      10.2100 10.3600
USDNGN      161.25    162.00
JPYNGN       1.6581    1.7081
CHFNGN      174.76    178.76
EURNGN     215.24    219.24
GBPNGN     252.37    256.37
ZARNGN      15.79      17.79


WTI fell for a second day after snapping the longest advance in almost four months. U.S. government data tomorrow is forecast to show that crude stockpiles dropped to the lowest level since September. WTI for September delivery, which expires today, declined as much as 52 cents to $106.58 a barrel in electronic trading on the New York Mercantile. Volume for all futures was about 62 percent below the 100-day average.

Interest rates
NIBOR (%)                        LIBOR (%)

O/N               14.5000          USD 1 month       0.1836
7 Day             15.0000          USD 2 month      0.2262
30 Day          15.3333           USD 3 month      0.2631
60 Day          15.6667           USD 6 month      0.3945
90 Day          15.8333           USD 12 month    0.6683
Y/Y Consumer Inflation June 2013 :      8.4%
FX Reserves: 17 July 2013 (USD bn)    46.923
MPR                                                             12.00%
Source: Reuters, Bloomberg, Central Bank of Nigeria, Financial Market Dealers Association Standard Chartered Bank Nigeria.

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