Financial market update

03 July 2012, Sweetcrude, Lagos – Local and international financial market update.
NIGERIA: Nigerian Finance Minister Ngozi Okonjo-Iweala said record-high interest rates, held at 12% since October, are threatening businesses. Okonji-Iweala plans to discuss the matter with Central bank of Nigeria Governor Lamido Sanusi, she told lawmakers in Abuja yesterday. The central bank of Africa’s top oil producer and most-populous country boosted its benchmark interest rate by 6 percentage points since September 2010 to curb inflationary pressures and support the naira.

EUROPE: Spain, which for years underestimated losses at its banks, is poised to overestimate how much they can earn in an economy mired in recession. One of two outside advisers hired by the Spanish government to conduct stress tests on the nation’s lenders estimated that losses could reach 274 billion euros ($347 billion) in the next three years. The adviser, management-consulting firm Oliver Wyman, predicted banks could earn 23 billion euros a year before loss provisions, about what they made in 2011, even if the economy contracted by 6.5 percent under an adverse scenario.

CHINA: Chinese manufacturing indexes slipped to seven-month lows as overseas orders dropped, and South Korea cut its estimate for exports this year, underscoring risks to Asian economies from Europe’s debt crisis. A purchasing managers’ index for China fell to 48.2 in June from 48.4 in May, HSBC Holdings and Markit said yesterday.

Bonds – Trend remains bearish opening the week on the selling side across the curve, though not as aggressive as recorded after the auction last week. Weak demand for bonds expected to persist this week as we approach new yield levels.

Bills – Trading volume continue to dip yesterday with yields trading flat across traded tenors, though light demand recorded on the 1yr bill offered in the market at 17.29% yield, this wasn’t significant enough to bring on any form of rally in the market.

Money Market – OBB and unsecured O/N rates trading flat at 15.00% and 15.00% respectively, market liquidity remains relatively square as the CBN continues to effectively manage liquidity.

CBN WDAS AUCTION
Offered: $350mio Sold: $350mio
Marginal rate: 155.94
Weighted average: 156.03
No. of Banks: 20

FX
                          Hi              Low            Close         Prev.Close
USD/NGN 163.08/18   162.86/96   163.00/10    162.95/05