U.S stocks and bonds prices moved unsteadily as investors weighed Fed Chair Jerome Powell’s disposition to further hike interest rates to combat inflationary pressures. Central bankers are intensifying efforts to curb the highest inflation in decades. The S & P 500 shed 1.48% to close at 4,393.66, Nasdaq 100 decreased by 2.07% to 13,174.65 while DOW declined 1.05% to close at 34,792.76. The yield on 10-year USTs rose marginally by 1bp to 2.92%. Brent crude fell 0.6% to $107.73 per barrel while Gold was little changed at $1,952 an ounce. Investors continue to ponder over how the federal reserve will control inflation effectively without stifling economic growth.
Ukraine’s Prime Minister called on the members of IMF to donate 10% of their reserve assets and said it would cost $600 Bln to rebuild Ukraine after the Russian invasion. In the latest developments, Putin has claimed a victory in the battle for the strategic port of Mariupol, one of the biggest in Ukraine. There was little or no movement in Russian bonds, with Russia 28 flat at 26 and Russia 47 flat at 19.5. Meanwhile, the Bank of Russia extended measures to ease currency controls for all exporters. Russian exporters will now have up to 60 days to sell their earnings instead of 3 days. Despite of this, rouble has continued to strengthen with USDRUB down 1.65 roubles at 74.75. Rouble appreciation and a decline in export revenues had a negative impact on Russian stocks with IMOEX trading currently at around 2275. IMOEX lost more than 17.5% of its value in April. Vagit Alekperov, who was sanctioned by the UK, has stepped down from the position of the president of Lukoil, Russia’s largest privately held oil company. Lukoil bonds gained on this news with Lukoil 22 up from 67 to 69 and Lukoil 2030 up 1% at 38.5. Meanwhile, in the attempt to stabilise gas prices, UK has allowed payments for gas via Gazprombank until the 31st of May.
Bunds open weaker following the trend from last session. The 10Y touched a high of 0.967% before dropping to 0.942%, down 2bps day-on-day. Peripherals mirrored the move on bunds with a weak open; 10Y BTPs yields went as high as 2.53% before retreating to 2.50%, 3 basis points firmer. Stocks were weaker as investors digested Fed Chair Jerome Powell’s comments on validating 2 or more 50 basis points interest rate increases to combat rising inflation. Consequently, the Stoxx 600, opened at 457.92 compared to previous sessions closing of 461.57.
NGERIA leading losses at the open following remarks by Finance Minister Zainab Ahmed that the country has plans to raise $950 million latest in May in another Eurobond offering. The rest of the space similarly heavy as rates resumed their ascent; Fed’s Powell made a case for more half-point hikes post the May meeting citing an overheated labour market. ZAMBIN holding flat however as China gave real commitment to join the credit committee according to the IMF.
Activity in the local Secondary Market for Bonds was mixed amid a relatively weak money market liquidity. Although improved offers were seen around the short to mid end of the curve, there were few serious takers. However, the long end remained relatively stable. Intraday, average yields rose 1pb across the curve. Consequently, FGN 23s closed at an offer rate of 5.60%, from previous day’s level of 5.30% while 50s closed at an offer rate 12.94%, same as previous days level. Secondary Market for Treasury bills was mostly quiet across the curve except for some demand seen across the short to mid tenured maturities and few selloffs on the long end. Day-on-day, average discount rates were mostly unchanged across the securities traded. Hence, discount rate on 8th August SPEB remained at 3.22% while 16th of March 2023 NTB rose by 10bps from 4.40% to close at 4.50%. The exchange rate between the naira and the US dollar closed at N419.50/$1 at the official I&E window compared to previous sessions level of N418.33/$1, a depreciation of circa 0.28%.