Financial market products & services update

Financial markets25 June 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Central Bank of Nigeria has raised the minimum capital base for operators of Bureaux de Change (BDCs) in the country from N10 million to N35 million. In order to ensure that only genuine companies operate as BDCs in Nigeria, the CBN also made the following modifications to the Bureaux De Change Guidelines – the mandatory cautionary deposit is reviewed to N35 million and shall be deposited in a non-interest yielding account in the CBN upon the grant of Approval-in-Principle.

FIXED INCOME: Yesterday, we saw the long end of the tbill curve grind lower, With good interest in the 7 may 15 tbill – 317 days (lower by 42bps yesterday). Demand on this was driven by the expectations of lower stop rates at today’s Primary Market Auction. We expect a quiet session today as focus will be on the auction. Another two tbills were added to our trading maturities yesterday – 23 October 2014 and 30 October 2014, both closing pretty much unchanged from open 11.20% and 11.23% (yield) respectively. The bond market recorded slight gains with average yields closing 3bps lower. Electronically, flow in the fixed income market was biased towards better buyers 60/40.

West Texas Intermediate crude rose for the first time in three days amid signs that the Obama administration is easing restrictions on the export of ultra-light U.S. oil. WTI for August delivery climbed as much as $1.47 to $107.50 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.27.

FX: It was a lacklustre trading day for USDNGN yesterday. The pair was quiet stable for the whole day, as the market traded a mere 25 points range. The market tested, but failed a break of the 163.00 level at open with the day’s high 162.85/95 recorded early in the day, after which rates slightly depressed and remained within the 162.60-162.80 range throughout, closing at 162.68/78. The Central Bank of Nigeria’s new circular aimed at sanitising the parallel market by increasing the capital requirement of the BDC firms by 250% is expected to slightly curb the buying pressure on the pair in the short term.

US: The U.S. unemployment rate can fall even further before the Federal Reserve raises interest rates, William Dudley, president of the New York Federal Reserve Bank, told a Puerto Rico accounting group on Tuesday. “We think we can get the unemployment rate considerably lower and still not have an inflation problem. We also don’t have inflation at a level consistent with price stability,” said Dudley. He also added that the market expectations are that the Federal Reserve will start to raise short-term interest rates around the middle of 2015. In May, the U.S. jobless rate was 6.3 percent, the lowest since the end of 2008 and unchanged from April, according to the Labor Department.

EUROPE: Italian Prime Minister Matteo Renzi called today for a change of course in Europe, saying that austerity policies on their own could not guarantee fiscal stability in the face of rising unemployment and economic stagnation. Speaking in parliament ahead of this week’s European Union summit, Mr Renzi said Italy was not asking for a relaxation of EU budget rules but for existing rules to be flexibly applied in exchange for commitment to a package of domestic structural reforms that Italy would achieve by 2017. “It is obvious that the trade-off between the reform process and the use of the margins for flexibility which already exist and which are available to member states is what has always happened,” he said.

Macro economic Indicators
Inflation rate (Y-oY) for May. 2014          8.00%
Monetary Policy Rate current                    12.00%
FX Reserves (Bn $) as at June 20             37.092

Money Market Highlights

O/N                             10.5833
30 Day                        12.2600
90 Day                        13.2775
180 Day                      14.1841
USD 1 Month            0.1515
USD 2 Months          0.1973
USD 3 Months          0.2336
USD 6 Months          0.3263
USD 12 Months        0.5471

Benchmark Yields
Tenor          Maturity        Yield

91d                 28-Aug-14        10.19
182d               20-Nov-14       10.60
364d              07-May-15        10.62
2y                    16-Aug-16        11.39
4y                    31-Aug-17         11.32
5y                    29-Jun-19         11.38

Indicative Currency Exchange Rates
                          Bid         Offer
EURUSD         1.3511      1.3713
GBPUSD          1.6858    1.706
USDJPY           101.92    101.95
USDCHF         0.8887    0.8988
GBPEUR          1.2361     1.2557
USDZAR          10.5095  10.7155
USDNGN         162.37     163.07
JPYNGN          1.5461      1.6467
CHFNGN         181.22     182.91
EURNGN        220.81     222.18
GBPNGN         275.26     276.66
ZARNGN         14.43        16.23

Hi              Low           Close       Prev.Close
162.86/96    162.60/70  162.68/78    162.58/68

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