Financial market products & services update

*Financial markets.

*Financial markets.

25 January 2016, Sweetcrude, Houston — Local and international financial market products and services update.
NIGERIA: Although experts have clamoured for the devaluation of the naira in the light of the nation’s depleting foreign exchange reserves, the Central Bank of Nigeria’s Monetary Policy Committee may not do so during its first bi-monthly meeting for this year, it has been learnt.
Sources close to the CBN and members of the committee said the two-day meeting, which commences today (Monday), would only review policy measures taken so far in the past year, adding that key policy issues, especially as regards the need to devalue the naira, might be delayed till the March or May meeting.
It was further learnt that President Muhammadu Buhari’s stance of not devaluing the naira would influence the voting pattern of the 11-member MPC when issues that border on the exchange rate policy are considered.

FIXED INCOME: Overall activity in the bond market last Friday was skewed to the buyers even though sellers emerged from time to time. Whispers of offshore interest in the Feb 2020s and this caused a mini rally across the rest of the curve. Compared to the others, this looks relatively cheap. PFA interest still the main driver of the June 2019s. In T-bills, after a quiet start, average yield closed +15bps led by a sell order on 31 mar bills. OMO maturity next week and we expect to see some buying interest in T-bills and also an OMO.

FX: The CBN maintained its Special Intervention rate at $/NGN 197.00 last week. MPC meeting to hold today and tomorrow. (25th – 26th Jan 2015).

COMMODITIES: Oil extended gains after the biggest two-day rally in more than seven years.
Futures were up 0.9% in New York after earlier swinging between gains and losses near $32 a barrel. Front-month prices capped a 21% advance over two sessions at the close Friday after the February contract expired Wednesday at $26.55 a barrel, the lowest since 2003. Hedge funds reduced record bets on falling prices ahead of the rally, data from the U.S. Commodity Futures Trading Commission shows.

CHINA: The People’s Bank of China is adding administrative orders to its toolbox to calm money markets amid record capital outflows and a surge in cash demand before Year of the Monkey celebrations.
The monetary authority told some banks to cancel repurchase agreements at interest rates it deemed excessive, people familiar with the matter said on Friday. It also advised some institutions to keep rates on the short-term loans below certain levels, they added. 7-day repos were conducted on Wednesday at 4.5%, the highest level since June and double the rate the PBOC charges for similar funds in open-market operations.

U.S: Federal Reserve Chair Janet Yellen and her colleagues have so far found themselves wrong-footed by the stronger dollar after they raised interest rates last month for the first time since 2006.
In spite of suggestions by some officials that the U.S. currency’s rise would soon run out of steam, the dollar has appreciated by some 2% since the central bank last met on Dec. 16, measured on an effective exchange rate-basis. Coming on top of a 11% increase in the year prior, the latest advance will curb already slowing economic growth and put downward pressure on an inflation rate that the Fed judges is too low as it is.

Macro Economic Indicators
Inflation rate (Y-o-Y) for December 2015               9.60%
Monetary Policy Rate current                                   11.00%
FX Reserves (Bn $) as at January 21, 2016            28.368

Money Market Highlights

O/N                                4.2500
30 Day                           8.7681
90 Day                         10.4040
180 Day                       11.7984
USD 1 Month              0.4255
USD 2 Months            0.5185
USD 3 Months            0.6191
USD 6 Months            0.8650

Benchmark Yields
Tenor      Maturity      Yield (%)

91d             21-Apr-16         4.31
182d          28-Jul-16          7.49
364d          19-Jan-17         8.17
2y               31-Aug-17      09.91
3y               30-May-18    10.25
5y               13-Feb-20      12.17

Indicative Currency Exchange Rates
Bid         Offer

USDNGN       197.00        199.50
EURUSD        1.0760        1.0962
GBPUSD        1.4167         1.4369
USDJPY         118.23         118.26
USDCHF        1.00285      1.0130
GBPEUR        1.3042         1.3247
USDZAR        16.4115        16.6048

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