28 October 2015, Sweetcrude, Lagos – Local and international financial market products and services update.
NIGERIA: The International Monetary Fund (IMF) has advised the Central Bank of Nigeria (CBN) and other central banks in Africa to allow their currencies to depreciate in order to absorb shocks to their economies.
The multilateral donor agency pointed out that resisting currency pressure depletes foreign exchange reserves and results in weaker imports.
It said that central banks in a growing number of countries had started tightening monetary policies, concerned that these developments may affect inflation expectations where inflation rates are near or even surpass the highest point of established bands.
According to the IMF, in a few highly dollarised economies on the continent, the recent exchange rate depreciation could also increase financial sector vulnerabilities.
It also noted that the recent depreciation of some currencies on the continent would increase the value in local currency of dollar-denominated liabilities, and hence the debt service burden for unhedged borrowers.
FIXED INCOME: Bonds had opened tighter yesterday as a spillover from Monday’s price action but the reversal was quick and intense. Whispers are that some offshore sellers’ offloaded risk as the final tranche of the JPM exit is to be done at the end of this month. Current money market liquidity of N500bn and expected liquidity helping bill market a bit. Selloff in bills was not as much as bonds (average yield up 5bps vs 25bps in bonds). We expect bonds to still see more pressure tomorrow.
FX: The special auction fund quoted at 196.97 yesterday by the apex bank. Gross FX reserves on a 30 day moving average now at $30.055bn from $30.37 as at 30 Sept 2015. Special intervention to take place tomorrow.
COMMODITIES: Oil held losses from a three-day slide below $44 a barrel before U.S. government data forecast to show the market remains oversupplied.
Oil has slid since a rally above $50 earlier this month as slowing seasonal demand from U.S. refiners sustained the country’s inventories 100 million barrels above the five-year average level. Prices have slumped more than 45% in the past year amid a global glut that the International Energy Agency estimates will remain until at least the middle of 2016.
U.K: A silent corner has emerged at the Bank of England.
Governor Mark Carney and the other eight members of the Monetary Policy Committee will gather Wednesday to debate the economic outlook, leading up to their interest-rate announcement on Nov. 5. While all members have the opportunity to learn from each other during their discussions, those outside the bank looking for a steer on how policy will evolve are comparatively left in the dark.
EUROPE: European stocks were little changed amid earnings reports and deal activity as investors awaited the Federal Reserve’s rate decision for indications of the trajectory of U.S. borrowing costs.
BT Group Plc gained 3.3% after the U.K.’s competition authority gave provisional approval to the company’s bid to acquire EE Ltd., owned by Deutsche Telekom AG and Orange SA. Heineken NV added 3.8% after the brewer posted sales growth that exceeded estimates. Lloyds Banking Group Plc fell 4.3% after reporting a bigger profit drop than analysts projected. The Stoxx Europe 600 Index lost less than 0.1% at 8:17 a.m. in London. The benchmark measure fell for a second straight session yesterday amid declines in energy shares and disappointing earnings.
Macro Economic Indicators
Inflation rate (YoY) for Nov., 2014 9.40%
Monetary Policy Rate current 13.00%
FX Reserve (Bn $) as at January 09 2015 30.055
Money Market Highlights
30 Days 13.3580 90 Days 15.0580
180 Days 17.1066
USD 1 Month 0.1935
USD 2 Months 0.2493
USD 3 Months 0.3231
USD 6 Months 0.5316 USD 12 Months 0.8381
Tenor Maturity Yield (%)
91d 28-Jan-16 07.36
182d 28-Apr-16 10.66
364d 20-Oct-16 11.19
2yr 31-Aug-17 13.09
3yr 30-May-18 13.22
5yr 13-Feb-20 13.40
Indicative Currency Exchange Rates
USDNG 196.97 199.47
EURUSD 1.0940 1.1141
GBPUSD 1.5199 1.5408
USDJPY 120.34 120.37
USDCHF 0.98135 0.9815
GBPEUR 1.3757 1.3961
USDZAR 13.5689 13.7726
JPYNGN 161.8497 161.9503
CHFNGN 204.99 206.68
EURNGN 217.24 219.60
GBPNGN 309.40 310.79
ZARNGN 14.69 16.61