Financial market products & services update

10 October 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Federal Executive Council on Wednesday approved N1.1bn for the purchase of two standard gauge locomotives. The locomotives are meant for the new standard gauge rail lines being constructed across the country. This was one of the resolutions reached at the weekly FEC meeting presided over by President Goodluck Jonathan. The ministers of Information, Mr. Labaran Maku; Transport, Senator Idris Umar; and Health, Prof. Onyebuchi Chukwu, briefed State House correspondents on the outcome of the meeting. Maku said the contract included the design, manufacture and commissioning of the two diesel locomotives with built in power packs and standard gauge 1,435mm for the Nigerian Railway Corporation.

Financial marketsFX: USDNGN maintained recent trend yesterday, opening at 164.50/60. There was the now customary late CBN intervention, which pushed the pair further down to a 164.00 intraday low. However, market retraced to close at 164.30/40.

FIXED INCOME: Finally a semblance of demand as bond market opened on a front foot following Wednesday’s release of the bond auction circular. The Bond market is still suffering from lack of depth, prices were still a bit all over the place but overall tone yesterday definitely strong closing 12.52% (-15bps). Saw the much expected move on tbills, we are up +20bps with 1-year paper well above 12% yield (closed 12.27%) following yesterday’s auction. With OMO stop rates being at 10.80% discount (11.25% yield) for the last 6 months, we see market forcing CBN to get used to higher yields with the auction cutting off at 10.90% discount (11.48% yield). All bills apart from the sub-20 day paper and the 1 year paper now at the 11% yield handle (We continue to see demand on the short dated paper). The month is looking tricky, as we expect some more pressure on the OMO stop rate to cut higher.

USA: The Federal Reserve will probably start raising interest rates around the middle of next year, two top officials at the U.S. central bank said on Thursday, although both said the exact timing will depend on the economy. “What we think now is that the capital markets have it more or less right but we don’t ourselves know when we’re going to do it,” Fed Vice Chairman Stanley Fischer said in Washington. “On the basis of our forecasts of the data, it looks like markets more or less have it right – somewhere in the middle of the year.”The Fed has kept rates near zero since 2008 and has nearly quadrupled its balance sheet to more than $4 trillion through a series of bond purchase programs in an effort to push borrowing costs down further and boost hiring.

COMMODITIES: Brent crude slipped to the lowest level in 27 months. Brent for November delivery fell $1.33, or 1.5 percent, to end the session at $90.05 a barrel on the London-based ICE Futures Europe exchange.

EUROPE: Germany will keep warning about the dangers of short-term fiscal stimulus at talks on the global economy in Washington although risks to growth are on the downside, Bundesbank President Jens Weidmann said on Thursday. Weidmann said he expected growth in Germany, Europe’s biggest economy, to come in below levels expected earlier this year, but maintained its fundamentals were sound. Pressure is mounting for Germany to use its healthy budget to boost public spending and spur growth in Europe and Weidmann said he expected discussion of stimulus on Friday, when Group of 20 officials meet on the sidelines of World Bank and International Monetary Fund meetings.

Macro economic Indicators

Inflation rate (YoY) for August. 2014               8.50%
Monetary Policy Rate current                            12.00%
FX Reserves (Bn $) as at October 02 2014     39.472

Money Market Highlights
NBOR (%)

O/N                              10.6250
30 Day                         12.6044
90 Day                         13.4236
180 Day                       14.3438
USD 1 Month              0.1527
USD 2 Months           0.1954
USD 3 Months           0.2291
USD 6 Months           0.3194
USD 12 Months         0.5506

Benchmark Yields
Tenor             Maturity          Yield (%)

91d                    08-Jan-15             11.26
182d                 09-Apr-15              11.81
364d                 03-Sep-15              12.27
2y                      16-Aug-16              1249
3y                      31-Aug-17              12.58
5y                      29-Jun-19             12.59

Indicative Currency exchange Rates
Bid         Offer

USDNGN           164.00      164.70
EURUSD           1.2580       1.2782
GBPUSD            1.5983       1.6185
USDJPY             107.92       107.95
USDCHF           0.94965     0.9598
GBPEUR           1.2582        1.2786
USDZAR           11.0011      11.2045
JPYNGN           152.2197    152.3203
CHFNGN          171.30        172.98
EURNGN          207.71       209.08
GBPNGN           263.64      265.04
ZARNGN             13.84        15.76

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