27 July 2016, Sweetcrude, Lagos — Local and international financial market products and services update.
NIGERIA: In a strong bid to tame inflation, the Central Bank of Nigeria (CBN) on Tuesday raised the Monetary Policy Rate (MPR), otherwise known as interest rate, by 200 basis points to 14% from 12%.
It also assured Nigerians of the stability of the banking sector, saying whilst it was poised to deal ruthlessly with any misdemeanour and malpractice, the recent removal of some banks chiefs was not a sign of distress.
The apex bank spoke at the end of its two-day MPC meeting in Abuja, indicating that while it moved up the interest rate, it left Cash Reserve Ratio (CRR) and Liquidity Ratio (LR) unchanged at 22.50% and 30% respectively as well as retained the Asymmetric Window at +200 and -500 basis points around the MPR.
FX: Indicative closing range for yesterday was $/NGN 310.00 – 315.00. An uneventful trading tone yesterday and the MPC pronouncement seems to send in signal that the CB intends to maintain the FX reforms.
FIXED INCOME: Because there was no OMO sale, bonds surprisingly opened tighter yesterday with street buying paper but in tiny clips. Tone in bill market was mixed. Money market liquidity (estimated to be above N200bn) gave room for the buying seen. Real money accounts were also seen hunting for yields in bills. Overall, volumes traded in both bills and bonds were quite thin as all eyes were still on the policy announcement. At the MPC, the CBN raised its MPR by 200 bps to 14%, the asymmetric band around the MPR was not altered from its current +200bps/- 500bps and the CRR was kept unchanged at 22.5%. We expect the rate hike to affect the bond market more (roughly only 100bps hike had been priced by market).
CHINA: Chinese stocks slumped the most in six weeks as a report about possible curbs on wealth management products added to concern that regulatory efforts to reduce risks in the financial system will limit flows into equities. The ChiNext Index of small-company shares sank 5.5%, the most since June 13, while the Shanghai Composite Index fell 1.9%. The Shenzhen Composite Index lost 4.5%.
China’s banking regulator is considering tightening curbs on the nation’s $3.6 trillion market for WMPs, the 21st Century Business Herald reported, citing people it didn’t identify. Authorities may set a limit on how much WMPs can invest in equities and “non-standard assets” such as loans, the report said.
JAPAN: Japanese Prime Minister Shinzo Abe said today that his government would compile a stimulus package of more than $265 billion (202.01 billion pounds) to reflate the flagging economy, media reported, though it is unclear how much will be spent to directly boost growth.
The premier’s 28 trillion yen ($265.30 billion) stimulus package, which exceeds initial estimates of around 20 trillion yen, includes 13 trillion yen in “fiscal measures,” . Those measures are likely to include spending by national and local governments, as well as loan programmes.
COMMODITIES: Oil traded near the lowest close in three months as industry data showed U.S. crude stockpiles at the nation’s biggest storage hub rose, swelling supplies that are at a seasonal record.
Futures were little changed in New York after falling for a fourth session Tuesday. Inventories at Cushing, the delivery point for West Texas Intermediate crude, expanded by 1.4 million barrels last week, the American Petroleum Institute was said to report. Nationwide stockpiles slid by 827,000 barrels, according to the API data, and Energy Information Administration figures out Wednesday are forecast to show they dropped a 10th week.
Macro Economic Indicators
Inflation rate (Y-o-Y) for June 2016, 16.50%
Monetary Policy Rate current 14.00%
FX Reserves (Bn $) as at Jul 22, 2016, 26.321
Money Market Highlights
30 Day 15.6548
90 Day 17.2424
180 Day 18.7084
USD 1 Month 0.4909
USD 2 Months 0.5945
USD 3 Months 0.7335
USD 6 Months 1.0597
USD 12 Months 1.06675
Tenor Maturity Yield (%)
91d 27-Oct-16 16.37
182d 19-Jan-17 18.72
364d 06-Jul-17 20.60
2y 30-May-18 17.80
3y 28-Jun-19 16.48
5y 13-Feb-20 16.18
Indicative Currency Exchange Rates
USDNGN 300.00 315.00
EURUSD 1.0897 1.1099
GBPUSD 1.3007 1.3209
USDJPY 105.43 105.49
USDCHF 0.98855 0.9987
GBPEUR 1.1818 1.2025
USDZAR 14.2115 14.4149
JPYNGN 2.9443 2.9451
CHFNGN 311.65 313.34
EURNGN 340.69 342.05
GBPNGN 371.39 372.79