03 February 2016, Sweetcrude, Lagos – Local and international financial market products & services update
NIGERIA: Following the continued depletion of Nigeria’s external reserves as a result of dwindling crude oil prices and huge demand for the green back, experts in the nation’s financial sectors have stated that the federal government may sell its assets to foreign investors to shore up reserves.
Data released by the Central Bank of Nigeria (CBN) last Friday showed that the nation’s external reserves fell to $28.1 billion on January 28, the lowest level since 2005, On December 31, 2015, the reserves closed at $29.070 billion, reflecting a decline of 15.79% year-on-year (YoY) from $34.52 billion a year ago.
FIXED INCOME: Mostly quiet in the bond market yesterday. The news of DMO’s plan to offer N90bn at next week Wednesday’s bond auction spurred some selloff at open.
T-Bills on the other hand saw some demand yesterday though announcement of the special FX auction caused some selling on the short dated bills. As banks have to prefund for the FX auction, trend is usually for O/N to move higher once this announcement comes in. O/N closed at 5% from 1% yesterday.
FX: The CBN yesterday announced its weekly Special auction for this week to hold on Thursday and rate was maintained at $/NGN 197.00.
COMMODITIES: Oil bulls distressed that last week’s rally fizzled can find some comfort in forecasts for a bigger and longer rebound by the end of the year.
Analysts are projecting prices will climb more than $15 by the end of 2016. New York crude will reach $46 a barrel during the fourth quarter, while Brent in London will trade at $48 in the same period, the median of 17 estimates compiled by Bloomberg this year show. A global surplus that fueled oil’s decline to a 12-year low will shift to deficit as U.S. shale output falls, according to Goldman Sachs Group Inc.
CHINA: Traders are paying more to bet on a Yuan decline with options than they do for any other Asian currency, suggesting bears are regrouping after being thwarted by the central bank last month.
The extra cost for three-month options to sell the Yuan against the dollar in the Hong Kong market over contracts to buy jumped in January by the most since 2011, approaching the record seen after its Aug. 11 devaluation. The value of contracts carrying the right to sell the Yuan at or beyond 7 per dollar — 5.1% weaker than the current spot rate — has surged more than 60% this year.
While the People’s Bank of China has sold dollars, driven up Yuan interest rates and issued verbal warnings to deter speculators, hedge funds aren’t budging from their view that a weaker currency is unavoidable.
U.K: One question we never thought we’d ask in 2016: Is the Bank of England going to cut interest rates?
With traders starting to price in looser policy at the BOE and market expectations for the first increase in borrowing costs since the financial crisis pushed back to 2018, questions are shifting from how long officials will sit tight to whether the next move might even be a reduction. The Bank of Japan’s decision to introduce negative rates last week prompted renewed speculation about whether a similar move in the U.K. could ever be possible.
Investors will watch for any signals from Governor Mark Carney when he presents the central bank’s latest economic forecasts on Thursday.
Macro economic Indicators
Inflation rate (Y-o-Y) for December 2015 9.60%
Monetary Policy Rate current 11.00%
FX Reserves (Bn $) as at February 29, 2016 28.091
Money Market Highlights
30 Day 8.0928
90 Day 9.5710
180 Day 11.2067
USD 1 Month 0.4270
USD 2 Months 0.5241
USD 3 Months 0.6186
USD 6 Months 0.8650
Tenor Maturity Yield (%)
91d 05-May-16 4.32
182d 04-Aug-16 7.51
364d 19-Jan-17 7.65
2y 31-Aug-17 10.52
3y 30-May-18 10.71
5y 13-Feb-20 12.24
Indicative Currency Exchange Rates
USDNGN 197.00 199.50
EURUSD 1.0820 1.1022
GBPUSD 1.4321 1.4523
USDJPY 119.75 119.78
USDCHF 1.01255 1.0228
GBPEUR 1.3104 1.3309
USDZAR 16.1533 16.3567