16 December 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: The World Bank has projected that Nigeria’s economic outlook would remain difficult in the short run due to the persistent low price of crude oil in the international market. The World Bank in its Nigeria Economic Report 3, released recently in Abuja, stated that for the country’s economy to survive within this period, fiscal adjustment will be of critical importance, warning that even if oil prices recover, government oil revenues should continue to decline in the medium term relative to the size of the Nigerian economy. The World Bank, in the report presented by its Lead Economist for Nigeria, Mr. John Litwack, however, noted that investors are currently willing to bring considerable investment to Nigeria if they receive credible signals from the new government of commitments to policy directions and regulations consistent with strong private sector growth.
FIXED INCOME: Yesterday saw most bond prices down approximately 0.5%. The Sell-off began on the benchmark 20-year bond and occurred on the lesser tenors shortly after. Brent at sub $40 negative for Nigeria with benchmark crude price for 2016 set at $38. Bearish sentiments expect to weigh in today. Demand for T-bills picked up slightly ahead of today’s auction. Money market liquidity remains robust and today’s bill auction not expected to take it out.
FX: CBN intervention rate remained at $/NGN 196.97.
COMMODITIES: Congressional leaders agreed on a fiscal plan that would avert a U.S. government shutdown and lift the 40-year-old ban on crude oil exports, House Speaker Paul Ryan told fellow Republicans during a closed-door meeting Tuesday night. Ryan said the House planned to vote Thursday on the $1.1 trillion government spending bill and a separate measure to revive a series of expired tax breaks, according to Representative John Kline of Minnesota.
U.S: With the Federal Reserve decision about 12 hours away, currency traders are buying the dollar amid speculation nothing will derail the start of the U.S.’s first monetary policy tightening cycle since 2004.
Intercontinental Exchange Inc.’s U.S. Dollar Index, which tracks the greenback against six peers, held a two-day advance with futures contracts showing 78% likelihood that the Federal Open Market Committee will raise its benchmark from near zero later on Wednesday. Bullish sentiment has been subdued this month given expectations that future increases will be gradual and with traders on watch for a repeat of the dollar declines that followed the start of tightening cycles in 2004, 1999 and 1994.
E.U: Chinese junk bonds are getting some help from the nation’s central bank, making them more resilient if not immune to the global swoon in the riskiest debt ahead of the Federal Reserve’s interest rate decision.
While the average yield on Chinese firms’ speculative-grade notes in dollars has risen 30bp in the past 30 days to a two-month high of 8.84%, that’s less than the 79bp jump in similarly rated securities in the U.S. to 8.97%, according to Bank of America Merrill Lynch indexes. In China’s onshore market, the yield on 5year securities with local ratings of AA-, considered junk in the nation, has dropped 20bp in the period to a more than 6year low of 4.67%, according to China Bond data.
Macro Economic Indicators
Inflation rate (Y-o-Y) for November 2015 9.37%
Monetary Policy Rate current 11.00%
FX Reserves (Bn $) as at December 11, 2015 29.477
Money Market Highlights
30 Day 8.8969
90 Day 10.7784
180 Day 12.9809
USD 1 Month 0.3445
USD 2 Months 0.4300
USD 3 Months 0.5177
USD 6 Months 0.7485
Tenor Maturity Yield (%)
91d 17-Mar-16 1.33
182d 2-Jun-16 5.12
364d 1-Dec-16 5.84
2y 31-Aug-17 8.04
3y 30-May-18 9.27
5y 13-Feb-20 10.92
Indicative Currency Exchange Rates
USDNGN 197.00 198.97
EURUSD 1.0837 1.1039
GBPUSD 1.4918 1.5120
USDJPY 121.92 121.94
USDCHF 0.98355 0.9938
GBPEUR 1.3630 1.3835
USDZAR 14.8561 15.0601