Saturday, June 22, 2019 / 09.42AM / By ARM Research with additional comments from Proshare
During the week, the US Fed voted to leave the interest rate unchanged at 2.5%, citing a strong labor market and moderately rising economic activity as the basis for its decision. However, the Committee’s tone was more dovish, as FOMC acknowledged the uncertainties surrounding US’ growth picture and muted inflationary pressures. The committee noted that it will close-ly monitor incoming data and will act as appropriate to sustain an expansion in the economy.
Similarly, policy stance in U.K and Japan remain accommodative, with the central banks leaving rates unchanged at 0.75% and -0.1% respectively. Meanwhile, inflation in the EU rose at a much slower pace of 1.2% YoY in May (lowest since April 2018), from 1.7% YoY in the previous month, largely reflecting moderation in prices of energy and services.
On Monday, the National Bureau of Statistics (NBS) released inflation data for the month of May. The data revealed uptick in inflation by 3bps to 11.40% YoY, from 11.37% YoY record-ed in the prior month. The increase in price stemmed from 9bps increase in food inflation to 13.79% YoY (April: 13.70%), reflecting impact of the Ramadan season and disruption in farm-ing activities caused by continued conflict in the Northern region which drove increase in price of farm produce.
On the flipside, core inflation moderated further, down by 26bps to 9.02% YoY. This was spurred by a reduction in PMS prices by 3.4% YoY, outweighing the increase in diesel (10.87% YoY) and kerosene prices (23.07% YoY).
The Nigerian Bourse closed negative for the third consecutive week, with the NSE ASI shedding 0.65% WoW to close at 29,851.29 points and market capitalization shedding N78.1 billion. The bearish sentiment was spurred by losses recorded in Personal care (-0.24%), Construction (-1.96%), and Food (-2.40%) sectors offsetting the gains in Banking (+1.30), Brewers (+1.47%), Cement (+0.23%), Insurance (+3.28%) and Oil & Gas (+1.26%) segments.
A closer look at the market performance reveals selloff across stocks such as PZ: -4.76%, NESTLE: -5.57%, OKOMU: -10.00%, PRESCO: -9.09%, GUINESS: -3.68%, INTBREW: -9.97% and MTNN: -4.13%.
The CBN held another NTB auction this week, a move away from its customary 2-week break between auctions. The apex bank sold a total of N17.6bn which is in sync with the NTBs on offer at the auction ( vs N131.64bn at the last auction). Notably, compared to the last auction with a stop rate of 12.34%, the 1 year stop rate closed lower at 12.02%.
However, follow-ing sell-off in the 182-day bill (+45bps to 12.67%), average NTB yields rose 18bps to close the week at 12.48%. At the long end, average bond yields moved the opposite way declining 7bps to 14.31% with the Jan 22 issuance seeing the biggest demand (-63bps to 13.91%). Overall, average fixed income yields expanded 5bps WoW 13.39%.
Take-Away For The Week
Fig 1: Trend in headline inflation vs. Yield On 364 day T/Bills
The chart below shows trend in headline inflation vs yield on 364 day T-bill.
Source: NBS, ARM Research
Nigeria: Economic Dashboard @ 210619
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