US equities mixed, bonds yields rise as Powell brushes off views on higher interest rate increases

US Stocks finished mixed and Bonds yields rose amid Federal Reserve Chair Jerome Powell’s remarks dismissing the notion of higher interest rate hikes. Consequently, the S & P 500 lost 0.13%% to close at 3,930.08, DOW declined 0.33% to close at 31,730.30 while Nasdaq 100 rose by 0.06% to 11,370.96. The yield on 10-year USTs rose 3pbs to 2.88%, at the same time Gold rose 0.2% to $1,824.57 an ounce. Meanwhile, Brent crude rose 1% to $108.54 per barrel as EU nations consider delaying a plan to prohibit Russian oil if they are unable to persuade Hungary to support the embargo.

G7 ministers have continued talks in Berlin on further sanctions against Russia. Some EU nations have proposed to delay a ban on Russian oil and proceed with the rest of a planned sanctions package while trying to get Hungary on board. Officials from NATO will join the talks over the weekend, as Finland and Sweden prepare to join the military alliance. In retaliation to sanctions, Moscow has cut gas supplies to Germany by 3% in a largely symbolic move, which was seen as a warning to Europe.  Meanwhile, Russian forces continued attacking Mariupol’s Azovstal plant with artillery and airstrikes overnight. Despite the ongoing war, Ukrainian refugees have continued to return to the country in small numbers, although UN said it was too early to draw conclusions.  Russian stocks fluctuated near its May lows on Friday morning with IMOEX trading around 2290 level after falling 3.7% the previous day. Declines from Gazprom, Sberbank, Polyus and Norilsk Nikel have outweighed gains for fertilizer producer, PhosAgro. Russian ruble has continued to strengthen on the back of rising energy prices and growing revenues of Russian exporters. USDRUB dropped below 63 for the first time since 12th of February 2020. EURUB traded below 65, first time since 19th of June 2017.  At the same time, Russian sovereign bonds were slightly lower with Russia 28 down to low-mid 30s and Russia 47 in mid 20s.

Bunds open weaker retracing the trend from yesterday. The 10Y touched a high of 0.931% before dropping to 0.923%, 1bp down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open; 10Y BTPs yields went as high as 2.74% before retreating to 2.73%, 1 basis point firmer intraday. Stocks opened higher as investors capitalized on current market conditions by buying shares that have not been priced this low since the beginning of the covid pandemic. Consequently, the Stoxx 600, opened higher at 428.82 compared to previous sessions closing of 424.40.

A muted open to the space to end what has been yet another weaker trading week thus far. Yesterday saw GHANA close 0.125pts up with demand on short and 30-year tenors reversing earlier losses; NGERIA meanwhile, shed 0.625pts amid continued weakness with selling skewed to the shorter bonds.

Activity in the Nigerian local Secondary Market for Bonds was relatively calm. We saw some demand trickle in around the short end while the mid to long end of the curve had improved offers with minimal trades. Intraday, average yields were up marginally by 1bp across board. Consequently, FGN 24s closed flat at an offer rate of 7.50%, while 50s closed at an offer rate 12.83% up 7pbs from previous session’s level of 12.75%. Secondary Market for Treasury bills was relatively slow even though system liquidity was over N200bn. However, demand trickled in especially around the short end of the curve as Banks utilized idle cash balances to avoid anticipated CRR debits by the CBN. Day-on-day, average discount rates were mostly unchanged across the curve. Consequently, discount rate on 30th May 2022 SPEB was stable at 2.70% while the new 1-year NTB traded at sub 4.70% with few trades done. The exchange rate between the naira and the US dollar closed at N417.14/$1 at NAFEX compared to previous sessions level of N417.52/$1, an appreciation of circa 0.09%