Financial market products & services update

Financial markets 113 November 2014, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele has said he will continue to defend the naira after the currency plunged to a record low last week. “There’s no need for anybody to panic or worry,” Emefiele stated in an interview. “The central bank has always intervened. We know our reserves can support nine months of imports, which is far above the minimum expected. We believe we’re very safe.” The naira weakened to an all-time low on November 7 after a drop in crude prices, prompting the central bank to intervene. In defending the currency rate, Africa’s largest oil producer has reduced its foreign reserves to a four-month low of $37.8 billion.

FX: The Central Bank yesterday, further depreciated the RDAS marginal rate by about 54 points to 156.39(1% commission excluded) from previous level of 155.85, continuing the trend for the last 4 auctions, with today’s hike however the steepest so far. Resultantly, just about $120 million of the $200 million on offer was sold with an additional $120 million sold via forwards for 1-3 months maturities. Not much changed in the interbank market with another late Central Bank intervention seen, however failing to significantly impact levels yesterday. The pair opened at the high 168 levels and had gradually depreciated to the mid 169 levels before the intervention in the last hour of the day’s trading session. Brief respite for the pair didn’t last long, with some Central Bank intervention induced 167 level short-lived, as the pair finally closed at the high 169 levels.

FIXED INCOME: With deteriorating macro fundamentals (FX and Brent), the bond auction result shows that the DMO is trying to manage the potential higher yield expectations. Demand was very low and a total of NGN55bn was sold (as against NGN65bn they had on offer) – N10billion of 13.05% August 2016s at a marginal rate of 12% (bid/cover of 3.24X); N25billion of 14.20% March 2024s at 12.80% (bid/cover of 1.80X); and N20billion worth of the 12.1493% July 2034 bond at a marginal rate of 13% and bid/cover of 1.35X. The shift to the short-end (-14bps from last auction) highlights market’s uncertainties with regard to the outlook for long tenor yields. Lacklustre sessions recorded in secondary trading – both tbills and bonds. 03 September 15 which was previously overdone saw some correction. Traded 8.66% yield before closing at 9.71%.

COMMODITIES: Brent crude extended losses from a four-year low, trading near $80 a barrel amid signs that OPEC remains unwilling to reduce output to ease concern of a global supply glut. West Texas Intermediate was steady in New York. Brent for December settlement, which expires today, dropped as much as 52 cents to $79.86 a barrel on the London-based ICE Futures Europe exchange. The more-active January contract was down 46 cents at $80.66.

USA: New York City is experiencing its fastest rate of job growth in nearly 25 years, but most of the jobs are being created in low-paying industries, according to a report by the city’s top financial watchdog on Thursday. The city added 47,000 jobs in the third quarter, all of which were in the private sector, New York City’s Comptroller office said in its quarterly report on the city’s economy. That was a record number for the city and equated to growth of 5.4 percent, the highest since 1990. The surge in jobs was underpinned by the quickest pace of growth in a year in the city’s more than $1 trillion economy.

CHINA: China’s economy lost further momentum in October, with factory growth dipping and investment growth hitting a near 13-year low, reinforcing views that Beijing will need to do more to fight slackening growth. Months of tepid performance in factories and the growing drag from a weakening housing market are putting Beijing’s 2014 growth target of around 7.5 percent at greater risk. Fixed-asset investment, an important driver of growth, grew 15.9 percent in the first 10 months of the year from a year ago, the National Bureau of Statistics said on Thursday. That was the weakest pace since December 2001.

Macro Economic Indicators
Inflation rate (YoY) for Oct. 2014                      8.10%
Monetary Policy Rate current                             12.00%
FX Reserves (Bn $) as at November 7 2014     37.766

Money Market Highlights

O/N                              11.1700
30 Day                         12.1799
90 Day                         13.3331
180 Day                       14.1771
LIBOR (%)USD 1 Month 0.1528
USD 2 Months            0.2035
USD 3 Months            0.2332
USD 6 Months            0.3260
USD 12 Months          0.5638

Benchmark Yields
Tenor        Maturity        Yield (%)

91d              05-Feb-15         10.13
182d           07-May-15         10.78
364d           03-Sep-15          9.71
2y                16-Aug-16         12.08
3y                 27-Apr-17         12.68
5y                29-Jun-19          12.85

Indicative Currency Exchange Rates
Bid         Offer

USDNGN           172.20       172.90
EURUSD            1.2365       1.2567
GBPUSD             1.5673       1.5875
USDJPY              115.54        115.57
USDCHF            0.95935     0.9695
GBPEUR            1.2551         1.2755
USDZAR            11.0752      11.2786
JPYNGN            149.2697    149.3703
CHFNGN           178.06        179.75
EURNGN           214.34        215.70
GBPNGN           271.10         273.30
ZARNGN           14.15           16.07

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