Financial market update

Financial markets16 January 2014, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Central Bank of Nigeria (CBN) watchers say they expect the Monetary Policy Committee (MPC) to call a retention of the Monetary Policy Rates at 12 percent, despite fears of external influence on the committee’s decision after the CBN’s governors spat with the presidency last week. The next committee meeting comes up next week – this will be the first in the year and follows heated debate on the future of CBN governor Sanusi Lamido Sanusi. The CBN has held on to a tight monetary policy stance since 2011 and many believe that is unlikely to change soon.

BONDS: Quiet open yesterday as the market submitted bids for auction. Momentum built up at mid day with more sellers in the market taking average yields higher by about 7bps.

BILLS: Choppy movements seen in the belly of the curve in the past few trading sessions, moving within 30-50bps band as the market attempts equilibrium. Yesterday, we saw the market bid around the 71 – 127 day tenors. We still have NGN 578 billion OMO bills maturing this week warranting mop-up by the Central Bank. December inflation print came in higher at 8% (0.1% mom increase), although inching higher remains within the target band for the year (6% – 9%).

MONEY MARKET: OBB and ON rates at 10.25% and 10.50% respectively.

FX: Appreciation came for the local unit yesterday following huge LHS flows from a few counters in the market believed to be remnant of last week’s USD sales by state owned oil company. High USD demand in the market had earlier depreciated the currency to the day’s high of 159.85/95, but the LHS flows helped crash rates to give NGN a gain of about 28 points from previous close. Expectation is for a retracement in rates as huge demand for the greenback remains prevalent in the market.

CBN RDAS AUCTION: CBN offered $350 mio and sold $349.964 mio at Monday’s RDAS auction. Marginal rate increased to at 155.74 (1% commission excluded) and 19 banks participated.

US: U.S. producer prices recorded their largest gain in six months in December as the cost of gasoline rebounded strongly, but there were few signs of any sustained price pressures. The Labour Department said on Wednesday its seasonally adjusted producer price index rose 0.4 percent last month, the biggest rise since June, after slipping 0.1 percent in November. Even with the latest rise, however, prices at the wholesale level were up only 1.2 percent from a year-ago, suggesting a continued lack of pressure on the prices consumers pay.

EU: The euro zone trade surplus widened in November because imports fell more sharply than exports, data from the EU’s statistics office Euro stat showed on Wednesday, pointing to continued weakness of domestic demand. The region had an external trade surplus, unadjusted for seasonal swings, of 17.1 billion Euros ($23.41 billion), in line with economists’ expectations. It was above the 12.5 billion Euros in the same period of last year and a revised 16.8 billion euro surplus in October.

CHINA: China called on IMF member nations on Wednesday to stick to a commitment to give emerging markets more power at the global lender after U.S. lawmakers set back historic reforms that would give developing countries a greater say. The remarks by Chinese Foreign Ministry spokesman Hong Lei were an indirect criticism of the United States, the biggest and most powerful IMF member, where lawmakers failed on Monday to agree on funding measures needed for the reforms to move forward, though Hong did not mention the United States by name.

COMMODITIES: WTI traded near the highest price in two weeks after government data showed crude inventories fell to the lowest level since March 2012 in the U.S., the world’s biggest oil consumer. WTI for February delivery was at $94.20 a barrel in electronic trading on the New York Mercantile Exchange, up 3 cents.

Macro Economic Indicators
Inflation rate (yoy) for Dec. 2013           8.0%
Monetary Policy Rate current                  12%
FX Reserves (Bn $) as at Jan. 14         43.242

Money Market Highlights

O/N                                           10.6250
7 Day                                         10.8750
30 Day                                       11.1250
60 Day                                       11.4167
90 Day                                       11.7083
USD 1 Month                            0.1587
USD 2 Months                          0.2030
USD 3 Months                          0.2379
USD 6 Months                          0.3356
USD 12 Months                         0.5716

Benchmark Yields
Tenor                     Maturity             Yield (%)

91 days                      17-Apr-14               11.18
182 days                    05-Jun-14              12.08
364 days                    08-Jan-15              12.97
2 years                        23-Apr-15              12.45
4 years                         31-Aug-17             12.65
5 years                         30-May-18            12.66

Indicative Currency Exchange Rates
Bid             Offer

EURUSD         1.3622            1.3672
GBPUSD         1.6364             1.6414
USDJPY           104.7               105.1
USDCHF          0.9082         0.9112
GBPEUR         1.2013            1.2023
USDZAR         10.9087         11.0587
USDNGN         159.29          159.59
JPYNGN          1.5214           1.5714
CHFNGN         175.39          179.39
EURNGN         216.98         220.98
GBPNGN         260.66         264.66
ZARNGN           14.60            16.60

Hi                Low          Close         Prev.Close
   159.85/95    159.28/38   159.30/40    159.58/68

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