Financial Markets Today
The European Central Bank (ECB) concluded its monetary policy meeting today, with strong signals for increasing monetary easing, and the ECB President – Mario Draghi indicating the need for a significant amount of monetary stimulus to keep favourable financial conditions and support expansion in the Eurozone area. This comes of the back of rising investors’ fears of a bigger slowdown in global economic growth in 2019 after manufacturing activities in the largest economy in the Eurozone area – Germany (PMI) dropped to 43.1 points in July from 45 points in June, as well as a drop in manufacturing activities in the largest economy in the world – the U.S. with PMI dropping to 50 points vs 51 points expectation. Further comments by the ECB President of low risks for recession in the Eurozone arear caused a reversal in the downward trend in yields in the Eurozone seen earlier in the day.
We expect investors to remain cautious in the near term despite the ECB’s indication of its monetary easing policy stance and plans for additional monetary stimulus (QE) to boost economic growth in the Eurozone area in 2019. We also expect investors to look toward the U.S. Federal Reserve Bank monetary policy meeting expected to hold from 30 – 31 July next week, with mixed sentiments after U.S. economic data released today showed a better-than-expected Jobless claims which dropped to its lowest in 3months at 206,000 vs expected 219,000 claims.
MONEY MARKETS
CAPITAL MARKETS
FOREIGN EXCHANGE
COMMODITIES
Amount of money in the banking system opened on a positive note today at ca ₦21.67bn, lower than ca ₦25.59bn it opened at yesterday. The Central Bank of Nigeria (CBN) did not conduct an Open Market Operation (OMO) auction today.
Treasury Bills
Trading activities in the treasury bills secondary market ended on a bearish note, with some sell-offs seen particularly on the 42days – 203days tenor due to tight interbank liquidity. Average yields gained ca +9bps day-on-day as the 28 November 2019 maturity closed at 9.92% from 9.11%.
Bank Placements
Open Buy Back (OBB) and Overnight (O/N) rates traded lower day-on-day at 14.29% and 15.00% from 15.86% and 16.43%. Average fixed deposit rates amongst banks monitored showed:
– tier-1 rated banks at 3.00% for 30 – 60 days tenor on ₦10mln – ₦100mln.
– tier-2 rated banks at 7.00% for 30 – 60 days tenor on ₦10mln – ₦100mln.
Bonds
Activities in the domestic bonds secondary market traded mixed today, with yields trending ca -22bps lower on the April 2049 maturity at the start of trading, of the back of lower-than-expected stop rates at yesterday’s primary market auction. Some sell-off was seen across the curve towards the close of market activities, which cut back the day-on-day decline in yields. Average yields marginally gained +2bps day-on-day, with the February 2028 closing the day at 13.85% from 13.77%.
Eurobond
The Eurobond market opened today with continued demand on most maturities in the Nigerian Eurobond space, as Investors showed continued zest for the nations USD bonds instruments. Average yields declined -10bps day-on-day with the November 2027 paper closing at 5.87% from 6.01%.
Equities
The Nigerian equities market declined for a 2nd consecutive trading day, with the Nigerian Stock Exchange All Share Index (NSE ASI) depreciating by ca -0.35% day-on-day to close at 27,990.61pts, while market’s year-to-date returns declined further to -10.94%. This was due to losses in Dangote Cement Plc (-1.16%), MTNN Plc (-1.57%) and Zenith Bank Plc (-0.54%).
The NSE Industrial and Consumer indices gained ca +26bps and +16bps, while the NSE Oil & Gas & Industrial indices lost ca -81bps and -39bps respectively. Courtville Plc led the volume chart with ca 150.04m units and while the MTNN Plc led the value chart with ca ₦427.48mn.
The Naira traded flat day-on-day for the third time this week against the dollar in the interbank and parallel markets to close at ₦306.90/$1 and ₦360/$1 respectively. In the parallel market, it traded flat against the Pound Sterling day-on-day closing at ₦455/₤1 while it appreciated against the Euro at ₦403/€1 from ₦404/€1. The FMDQ Nigerian Autonomous Foreign Exchange (NAFEX) Fixing rate depreciated day-on-day at ₦361.60/$1 from ₦361.59/$1.
Crude oil prices appreciated day-on-day, off the back of a drop in weekly U.S. crude inventories by 10.8 million barrels vs market analyst expectation of 4 million barrels, data released by the Energy Information Administration (EIA) showed. However, potential gains were capped by effects of yesterday’s lower-than-expected Purchasing Manager Index (PMI) readings in the U.S., Germany and France. Brent crude oil price gained ca +0.68% day-on-day at $63.61pb, while WTI gained ca +0.72% day-on-day at
$56.28pb, as at report time. Spot gold shed ca -0.464% at $1,417.00 per ounce.
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| Benchmark T-Bills Discount Rates | ||||
| 25-Jul-19 | 24-Jul-19 | Change in Rates | ||
| 84 Days | 10.42% | 10.33% | 0.09% | |
| 175 Days- | 10.85% | 10.74% | 0.11% | |
| 322 Days. | 11.10% | 11.10% | 0.00% | |
| Source: FMDQ DQL for 25 July 2019 | ||||
| Benchmark FGN Bond Yields | ||||
| 25-Jul-19 | 24-Jul-19 | Change in Yield | ||
| 3 yrs: 16.00% 15-Jul-2021 | 13.00% | 13.00% | 0.00% | |
| 5 yrs: 15.54% 27-Apr 2023 | 13.20% | 13.43% | -0.23% | |
| 10 yrs: 13.98% 23-Feb 2028 | 13.85% | 13.77% | 0.08% | |
| 20 yrs: 16.25% 18-Apr 2037 | 13.99% | 13.99% | 0.00% | |
| 30 yrs: 14.80% 26-Apr 2049 | 13.97% | 14.10% | -0.13% | |
| Source: FMDQ DQL for 25 July 2019 | ||||
| Benchmark FGN EuroBond Yields | ||||
| 25-Jul-19 | 24-Jul-19 | Change in Yield | ||
| 3 yrs: NGERIA 6 3/4 01/28/21 | 3.85% | 3.91% | -0.06% | |
| 5 yrs: NGERIA 6 3/8 07/12/23 | 4.42% | 4.49% | -0.07% | |
| 10 yrs: NGERIA 6 1/2 11/28/27 | 5.87% | 6.01% | -0.14% | |
| 20 yrs: NGERIA 7.696 02/23/38 | 7.16% | 7.29% | -0.13% | |
| 30 yrs: NGERIA 9.248 01/21/49 | 7.72% | 7.82% | -0.10% | |
| Source: FMDQ DQL for 25 July 2019 | ||||
| AIICO Money Market Fund (AMMF) | |
| Net Yield (As at current date) | 12.98% per annum |
| Added Benefit | Personal accident insurance cover |
| AIICO Capital Guaranteed Income Note (GIN) Rates p.a. | |||||
| Amount (NGN) | 30 Days | 60 Days | 90 Days | 180 Days | 364 Days |
| 10,000,001 – 50,000,000 | 10.00 | 10.50 | 11.00 | 12.00 | 13.00 |
| 50,000,001 – 100,000,000 | 11.00 | 11.25 | 11.50 | 12.50 | 14.00 |
| 100,000,001 – 400,000,000 | 12.00 | 12.25 | 12.50 | 13.00 | 14.50 |
| Trading Treasury Bills Rates p.a. | |||
| Maturity Dates | Tenor (Days) | Discount Rate | Effective Yield |
| 29-Aug-19 | 41 | 9.55% | 9.65% |
| 17-Oct-19 | 90 | 8.50% | 8.68% |
| 07-Nov-19 | 111 | 9.55% | 9.84% |
| 16-Jan-20 | 181 | 9.80% | 10.30% |
| Select Macro-economic Indices | |
| Inflation % (June2019) | 11.22 (-0.18% ytd) |
| PMI (June 2019) | 57.40 |
| MPR (%) | 13.5 (-5%/+2% around mid-point) |
| CRR (%) | 22.5 |
| Brent Crude Price US$ pbbl | 63.61 (+0.51% d/d) |
| External Reserve (US$’billion) | 45.043 (+1.36% ytd) |
| GDP % (Q1 2019) | +2.01% (Q4 2018: +2.38% y/y) |
| NSE All Share Index (ASI) | 27,990.61 (-0.35% d/d; -10.94 ytd) |
| Market Capitalisation (₦’Trillion) | 13.64 |
Financial Markets Update – 25 JULY 2019
Important Disclaimers
This document has been issued and approved by AIICO Capital and is based on information from various sources that we believe are reliable. However, no representation is made that it is accurate or complete. While reasonable care has been taken in preparing this document, no responsibility or liability is accepted for errors or fact or for any opinion expressed herein. This document is for information purposes only. It does not constitute any offer or solicitation to any person to enter into any trading transaction.
Investments discussed in this report may not be suitable for all investors. This report is provided solely for the information of AIICO Capital clients who are then expected to make their own investment decisions. AIICO Capital conducts designated investment business with market counter parties and customers and this document is directed only to such persons. AIICO Capital accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. This report is for private circulation only and may not be reproduced, distributed or published by any recipient for any purpose without prior express consent of AIICO Capital. Users of this report should bear in mind that investments can fluctuate in price and value. Past performance is not necessarily a guide to future performance.
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