Financial market products & services update

*Financial markets.

*Financial markets.

11 July 2016, Sweetcrude, Lagos — Local and international financial market products and services update.
NIGERIA: Nigeria’s inflation readings may close first half positive as research reports indicate a moderation to 15.4% in the month of June 2016, down from 15.6% recorded for the preceding month, May 2016.
The trend has been on upswing month-on-month for the past ten months, culminating in a huge 6-year high recorded in May. National Bureau of Statistics, NBS, is expected to release its June figures this week. Research reports by FSDH Merchant Bank and Financial Derivatives Company, FDC, were in agreement that the headline rate for June would show a stabilising range between 15.39 and 15.5%. The stability would be coming at the backdrop of two major cost-push developments in the macroeconomic policy environment, notably, the upward price adjustment in petroleum products in May and the huge depreciation of the Naira against major currencies in June.

FX: Market opened on Friday after the long bank Holiday last week. The Indicative Interbank closing range on Friday was $/NGN 282.00 – $/NGN 283.00.

FIXED INCOME: The total of N190bn was sold vs. N94bn offered across the 3 tenors at the last T-bill auction. The 91,182 and 364-day printed at 10.23%, 13.04% and 17.62% yield respectively. These rates are higher than closing secondary market levels but same as the last bill auction on 22 Jun. This move by the CBN drained all of the liquidity in the money market. The auction results which came out after close of trading will cause this week to start bearish, dampening bond auction sentiments.

CHINA: China’s commerce minister says the outlook for the global economy remains grim despite it having overcome the impact of the 2008 financial crisis.
Gao Hucheng said at a G20 meeting in Shanghai that major economies must lead the way in tackling problems, including slowing trade and sluggish growth.
To boost trade the G20 ministers, from the world’s major economies, agreed to cut trade costs, increase policy co-ordination and enhance financing. They also approved a trade growth plan.
“We agree that we need to do more to achieve our common objectives for global growth, stability and prosperity,” the G20 ministers said in a statement.
Mr Gao said the international community now expected the G20 to show initiative and leadership in solving economic growth problems.

U.K: A sharp drop in U.K. gilt yields, and a similar decline in reference AA corporate bond yields, will continue to increase defined-benefit pension liabilities at U.K. corporates. The recent uptick in inflation expectations, with a 10% fall in sterling boosting estimates by about one percentage point, provides some offset. BT’s pension deficit was more than $6.5 billion last quarter. Some corporates, including Whitbread, Wolseley and J Sainsbury, will suffer a reversal of recent deficit improvements.
The key financial assumptions required for determining pension liabilities are the discount rate and the rate of future inflation. As the discount rate falls, so the size of the liability will increase, though lower inflation expectations could mitigate some of this liability increase.

COMMODITIES: Oil dropped after U.S. producers increased the number of active rigs to the highest in 12 weeks, raising speculation output declines that have trimmed a global glut may slow.
Futures fell as much as 1.3% in New York after rising 0.6% on Friday. Rigs targeting crude in the U.S. rose by 10 to 351 last week, the highest since April 15, Baker Hughes Inc. said on its website. Money managers cut net-long wagers on West Texas Intermediate to the lowest since March in the week ended July 5, Commodity Futures Trading Commission data show.

Macro Economic Indicators
Inflation rate (Y-o-Y) for May 2016,         15.60%
Monetary Policy Rate current                    12.00%
FX Reserves (Bn $) as at Jul 04, 2016,    26.398

Money Market Highlights

O/N                            7.7917
30 Day                      10.9580
90 Day                      13.1371
180 Day                    14.7910
USD 1 Month          0.4758
USD 2 Months        0.5594
USD 3 Months        0.6671
USD 6 Months        0.9374
USD 12 Months      1.06675

Benchmark Yields
Tenor      Maturity      Yield (%)

91d            06-Oct-16        9.74
182d          29-Dec-16      11.25
364d         15-Jun-17       13.88
2y              30-May-18     13.64
3y              29-Jun-19       13.81
5y              13-Feb-20       14.11

Indicative Currency Exchange Rates
Bid          Offer

USDNGN         281.00       284.00
EURUSD         1.0935        1.1137
GBPUSD         1.2796         1.2998
USDJPY          101.95         101.98
USDCHF         0.97905      0.9892
GBPEUR         1.1586         1.1790
USDZAR         14.5010       14.7043
JPYNGN         276.4397    276.5403
CHFNGN        285.66        287.35
EURNGN        310.53        311.89
GBPNGN        286.94        288.34

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