21 December 2015, Sweetcrude, Houston – Local and international financial market products and services update.
NIGERIA: Banks are desperately searching for how to invest the over N1 trillion of excess cash in their vaults. This desperation was reflected in trading for treasury bills (government securities) where banks and other investors demanded for 291% more bills than the amount offered for sale by the Central Bank of Nigeria, CBN. Trading results show that banks and other investors demanded for N791.42 billion worth of treasury bills but the CBN offered N202.4 billion.
Recall that the CBN on Tuesday November 24th, lowered interest rate it pays on bank’s excess cash deposited in its Standing Deposit Facility, SDF, to 4.0% from 11%. Since then banks have been battling with where to invest their excess cash. Investigation revealed that volume of excess cash in bank’s vaults rose during the week, due to reimbursement for unmet demand for foreign excess exchange, and payment of matured treasury bills.
FIXED INCOME: Expectation by some players of another OMO auction caused a soft start in bonds on Friday. There was later some reversal of sentiment in the absence of the OMO. Better tone in bonds and T-bills to close last week as demand trickled in. FX funding for special auction took out liquidity of approximately N500bn. This caused O/N rates to move up slightly again to close at 1.5%.
FX: The CBN daily auction closed for the year on Friday and will resume next year on January 4 2016.
COMMODITIES: Brent crude slumped to the lowest level since 2004 amid speculation suppliers from the Middle East to the U.S. will exacerbate a record glut as they continue fighting for market share.
Futures fell as much as 1.9% in London after a 2.8% drop last week. Producers are focusing on reducing costs amid the price decline, Qatar Energy Minister Mohammed Al Sada said Sunday at a meeting of Arab oil-exporting nations in Cairo. Drillers in the U.S. put the most rigs back to work since July, adding 17, data from Baker Hughes Inc. showed.
CHINA: China’s stocks rose to a three-week high, extending a weekly gain, as consumer companies rallied and investors bet the government will accelerate reform of state-owned enterprises.
The Shanghai Composite Index added 1.8% to 3,641.98 at 1:19 p.m. local time. The measure climbed 4.2% last week, led by property developers, after data showed home prices increased in more cities. Inner Mongolia Yili Industrial Group Co., the nation’s biggest dairy producer, and Henan Shuanghui Investment & Development Co., a pork processor, rallied to lead gains among consumer staple groups.
U.K: David Cameron is facing calls to allow ministers to campaign for Britain to leave the European Union, opening a potential rift between the prime minister and members of his government.
U.K. ministers are usually expected to abide by the principle of collective responsibility, which means supporting the government’s agreed position even if they have personal doubts. With Cameron on course to campaign to stay inside the EU, ministers who wish to publicly disagree would currently have to quit their posts.
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 17, 2015 29.423
Money Market Highlights
30 Day 9.4370
90 Day 10.0937
180 Day 12.2696
USD 1 Month 0.4130
USD 2 Months 0.4966
USD 3 Months 0.5855
USD 6 Months 0.8070
Tenor Maturity Yield (%)
91d 17-Mar-16 2.90
182d 16-Jun-16 5.13
364d 15-Dec-16 6.90
2y 31-Aug-17 8.75
3y 30-May-18 9.95
5y 13-Feb-20 11.03
Indicative Currency Exchange Rates
USDNGN 197.00 199.50
EURUSD 1.0767 1.0969
GBPUSD 1.4806 1.5008
USDJPY 121.30 121.33
USDCHF 0.98835 0.9985
GBPEUR 1.3615 1.3819
USDZAR 14.9826 15.1859