Fixed Income, Currency and Equity Market Reports
Russia’s ongoing invasion of Ukraine saw no respite this week, dragging the global market down its murky path. The S&P 500 has fallen more than 10% since its 2022 high, while the DJIA heads for its fifth consecutive week of losses. Elsewhere, the yield on the 10-year U.S. treasury bill retreated above 2%, ignoring the impact of the Russia-Ukraine conflict on risk and focusing on the soaring inflation rate, as the he recently released US Consumer Price Index (CPI) for February reminded us of the runaway price trend in the world’s largest economy.
The US Department of Labor’s Bureau of Labor Statistics revealed that inflation in February rose again, coming in at 7.9% year-on-year, remaining slightly ahead of market expectations of 7.8% and exceeding the overall annual rate of 7.5% recorded the previous month. . On a monthly basis, the CPI rose 0.8%, beating a projection of 0.7%. Core CPI, which excludes volatile food and energy prices, rose 6.4% annually and 0.5% monthly, down in line with expectations. Decoupling February inflation data, monthly changes in food, energy and housing costs remained the main drivers in the review period, while prices for used cars and trucks declined . On the political side, the high rate of inflation for four decades should encourage the Federal Reserve to begin the normalization of monetary policy, with the announcement of the first series of interest rate hikes expected in the coming week.
On the local front, data from the Central Bank of Nigeria revealed that foreign investors’ appetite for the Nigerian financial market continues to deteriorate as foreign portfolio investments (REITs) fell for the second year in a row, registering a year-on-year decline. by 34.30% for a total of US$3.39 billion in 2021. Compared to the pre-pandemic performance of 2019, REITs for 2021 fell by 79.30%. Essentially, inflation, insecurity and exchange rate instability have been the long-term sponsors of waning foreign investor interest in the Nigerian market, and we are likely to see election fears join the pack. deterrents from the REIT for this year.
System liquidity was bolstered by a redemption of the OMO earlier in the week, but the settlement of the PMA mid-week lowered the level of liquidity towards the end of the week. Nevertheless, the Open Buy Back (OBB) and Overnight (O/N) rates each fell from 8.83% to 4.50% and 5.00%, respectively.
Despite an early bond coupon and treasury bill maturity totaling N130.73 billion, we see interbank rates rising at the end of the coming week, helped by retail FX auctions.
Goods of treasure
The Treasuries market was quiet for most of the week, with activity geared towards the mid-week PMA. The benchmark average yield remained unchanged at 3.52%.
The DMO sold N236.53 billion worth of notes against N94.00 billion offered at its NTB auction today. Ratings of 91 days, 182 days, and 364 days were assigned 1.75%, 3.28%, and 4.10%, respectively. Compared to the previous auction, the rates for the 91-day, 182-day and 364-day notes fell by 49 basis points, 2 basis points and 25 basis points respectively.
We expect the market to trade tepid next week.
The local bond market was slightly mixed this week, but the aggressive selection observed on certain maturities weighed on the overall performance. Thus, the average yield of the benchmark index fell by 17 basis points to 10.39%.
We expect to see a slight bullish bias next week, supported by the maturing bond coupon payment.
The Eurobond market started the week on a bearish note, but sentiment improved later in the week, supported by high crude oil prices. The benchmark’s average yield fell 17 basis points to 7.83% week over week.
We expect the market to continue to be supported by high crude oil prices, while remaining sensitive to concerns related to the Russian-Ukrainian conflict.
The naira appreciated against the US dollar by 4 basis points to $1/₦416.50 at the Investors’ and Exporters’ exchange window this week.
The stock market resumed its uptrend this week, with gains recorded on three of the week’s five trading days. At market close today, the benchmark was up 0.36% on weekdays, to close at 47,437.48 points. The year-to-date yield stood at 11.05%, while the market capitalization stood at ₦25.57 trillion. Similarly, investor sentiment, as measured by market breadth, closed positive at 1.03x on 34 gains and 33 declines.
The volume and value traded rose 103.69% and 0.31% week over week, respectively. The most traded stocks by volume were FCMB (962.71 million units), UNITYBNK (528.49 million units) and FBNH (124.06 million units), while FCMB (₦3.59 billion ), GTCO (₦3.10 billion) and ZENITHBANK (₦2.45 billion) topped the weekly chart.
We expect to see mixed feelings next week as the activities of the profit takers collude with those of the bargain hunters.