US Stocks were little changed, and Bonds yields rose as investors geared up for the biggest Fed interest rate increase since 2000 and watched out for more signs on how forceful it will control inflationary pressures. The S & P 500 gained 0.48% to close at 4,175.48, Nasdaq 100 rose by 0.22% to 12,563.76 while DOW went up 0.20% to close at 33,128.79. The yield on 10-year USTs was at 2.96% ahead of Feds expected interest rate hike and plans for reduction of its balance sheet. Brent crude rose 2.6% to $107.65 per barrel as uncertainty over crude oil flows persisted while Gold was at $1,870.00 an ounce. Investors think that any signal of a higher rate hike, like a 75-basis-point increase could stir up markets. Later today, there will be a briefing with Chair Jerome Powell on Federal reserve’s rate decision. Also, US April jobs report is expected on Friday.
A new set of EU sanctions may include a ban on Russian Crude oil over the next six months and refined fuels by the end of the year. Hungary and Slovakia, which are heavily reliant on Russian energy should be granted a longer timeframe. The EU is also proposing to cut off Sberbank and other lenders from the SWIFT payment system. The payments on Russian Sovereign Bonds maturing in 2022 and 2042 have reached the bondholders yesterday, but there was a muted reaction on the market with Russia 28 staying around mid 30sl and Russia 47 in mid 20s. The next tranche of payments on Russian bonds, Russia 26 and Russia 36, is due on May 27, two days after the expiry of OFAC’s license. The license may be extended by another 3 months. Russian rouble continued to strengthen in the thin market conditions with most of Russia closed for holidays. USDRUB has traded as low as 70 losing 1.2%. At the same time Russia’s MOEX erased earlier gains and dropped 0.7% after the news on a new set of EU sanctions. Biggest decliners included gas producer Novatek and oil producer Lukoil.
Bunds opened weaker retracing the trend from yesterday. The 10Y touched a high of 1.03% before dropping to 0.996%,3bps down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open; 10Y BTPs yields went as high as 2.85% before retreating to 2.80%, 5 basis points firmer intraday. Stocks opened lower as investors wait for the outcome of FOMC meeting later today to get more clarity on the direction of monetary tightening; the Stoxx 600, opened lower at 444.692 compared to previous sessions closing of 446.20. In other news, Bank of England rate decision and briefing is expected Thursday.
A flat to firm opening to the space ahead of the FOMC decision later in the day where a 50bps hike is expected. Belly to long GHANA found some demand later in the session on Tuesday but with the reversal taking the curve up about a point from session lows; the curve closed weaker nonetheless, shedding 1.25 cash points.
Activity in the local Secondary Market for Bonds was mixed closing Friday amid a relatively buoyant Money Market liquidity. FAAC inflow of over N300bn is expected to boost system liquidity in the coming days. Yields on the short end were steady, mid end of the curve had improved offers without serious takers while the long end of the curve had some bullish sentiments. Intraday, average yields were up by 2bps across the curve. Consequently, FGN 27s closed at an offer rate of 11.00%, up 10pbs from previous day’s level of 10.90% while 50s closed at an offer rate 12.87%, down 2bps from previous days level of 12.89%. Secondary Market for Treasury bills was generally quiet even though system liquidity improved slightly. Day-on-day, average discount rates were mostly unchanged across the curve. Consequently, discount rate on 8th August 2022 SPEB and the new 1-year NTB were stable at 3.50% and 4.40% respectively. Expected inflow from FAAC may spur demand when it hits the money market. The exchange rate between the naira and the US dollar closed at N416.65/$1 on Friday at NAFEX compared to previous sessions level of N417.42/$1, an appreciation of circa 0.21%.