May 11, 2019 / 08:46AM / By ARM Research
Global trade tensions resurfaced this week following Trump’s decision to reinitiate tariff hike on $200 billion worth of Chinese imports from 10% to 25%. Particularly, Trump alluded to China reneging on prior agreements over the past week as the underpinning for reigniting the trade wars. Amidst the global tension, recent release from U.S showed its trade deficit for March widened by 1.4% YoY to $50.0 billion as higher demand for energy and crude products pushed imports higher over the month. Meanwhile, US trade deficit with China shrunk to a 5 -year low contracting 16.2% YoY to $20.7 billion. This was mainly driven by higher Soya bean exports which surged 23.6% YoY. Shifting gears, US inflation for the month of April, rose to 2.0% YoY from 1.9% recorded in the prior month. This mirrored increases in energy prices and transportation services, which muted a slowdown in food inflation.
For the first time since 1999, Godwin Emefiele became the first CBN governor to be appointed for a second term in office following his reappointment by President Buhari earlier this week. Highlights of major achievements during his first tenure includes: (i) Introducing the Investor & Exporter Window in 2017 which brought stability and liquidity into the FX market. (ii) Eradicating the multiple exchange rate and streamlining it to just two—NAFEX and NIFEX. That said, the reappointment of the CBN governor suggests continuity in current monetary policy direction where FX stability remains the front burner of monetary policy deliberations.
The Nigerian Bourse closed negative this week with the NSE ASI slipping 1.25% WoW to close at 28,847.81 points, with the market capitalization dropping by N137 billion .The bearish sentiment was evident across all sector(s), excluding the personal care sector which gained 12bps, hinged on slight uptick in the shares of PZ cussons. Pointedly, the cement sector (-56bps), banking sector (-173bps), Food (-20bps) and brewers (-54bps) led the losses. A closer evaluation of the market performance reveals selloff across various stocks such as DANGCEM: -56bps, GTBANK: -433bps, ZENITH: -476bps, DANGSUGAR: -36bps, FLOURMILLS: -93bps, INTERBREW: -114bps, SEPLAT: -998bps while NESTLE closed flat.
Unlike prior period, this week witnessed series of liquidity mop up by the CBN. For context, OMO auctions held on 3 separate days with a total of N613 billion sold, which is just N80 billion smaller than what was sold in April. However, the CBN turned bearish with stop rate plunging 16ps this week to 12.82%. Consequently, given the spate liquidity mop up this week, average treasury bill yield rose 3bps WoW to close at 13.02%. On the other hand, average bond yields fell 21bps WoW to 14.11% over the same period as a result of increased demand for the JUL ’21, APR ’23, MAR ’27 JUL ’34 and APR ’37 which saw their yields fall at least 30bps each. Overall, average fixed income yields ended this week at 13.56%, 9bs lower than last week.
Take-Away For The Week
Trend in OMO rates and Issuances—N’billion
This week, we feature the trend in OMO rates and Issuances year to date.
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