Financial market update

24 May 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: The CBN kept its policy rate on hold at 12 percent on Tuesday, for the fourth time in a row, citing the need to balance inflationary concerns with slowing growth. The CBN governor said the bank was concerned about a slowdown in global economic activity and lower crude oil prices, as well as domestic oil output, which meant Nigeria was facing a potentially sustained decline in its surging growth rates. Relatively benign inflation and slow credit growth meant there was no further need for monetary tightening, Sanusi said

EUROPE: European stocks slid the most in a month amid growing concern that Greece may leave the euro as the region’s leaders prepared to meet in Brussels. The Stoxx Europe 600 Index slid 2.1 percent to 239.51 at the close of trading after surging 2.5 percent over the previous two days. That’s the biggest drop since April 23. The gauge has retreated 12 percent from this year’s high on March 16 amid mounting speculation that Greece will be unable to form a government willing to implement pledged austerity measures.

Bonds – Very light trading in the market yesterday, yields inched lower on the short end. Demand in the bond market is still weak as T-bill continues to see majority of the flows in the market.

Bills – On the back of the liquidity which came in from maturing bonds on Tuesday, the liquidity expected from FAAC momentarily and the liquidity coming from maturing bonds on Friday, market traded very bullish on Wednesday. Rates came off across all maturities with 91 days and below dipping about 100bps, the 182day to 364 days dipped an average 80bps. The auction was earlier expected to close higher than the last offering but the liquidity quickly changed the dynamics.

Money Market – OBB and unsecured O/N rates stable yesterday at 12.50% on the back of the inflow from the bond maturity of N245billion on Tuesday. Market is set to become more liquid with FAAC of about N283billion expected into the system in the next few days and a sure N50billion from maturing bonds on Friday. OMO of N150billion maturing 19th July 2012 was offered yesterday but no sales were made as the CBN cited “high bids” as their reason for not selling.

CBN WDAS AUCTION

Offered: 200mio
Sold: 200mio
Marginal rate: 155.70
Weighted average: 155.78
No. of banks: 18

FX
                          Hi             Low           Close        Prev.Close
USD/NGN  159.60/70  159.00/10   159.35/45  159.25/35