US stocks mixed; bonds steady ahead of FED minutes

US Equities finished mixed, and Treasuries steadied as Markets gauged the outlook for Fed’s monetary tightening campaign. Consequently, the S & P 500 lost 0.81%% to close at 3,941.48, NASDAQ 100 declined 2.35% to close at 11,264.45 while DOW gained 0.15% to close at 31,928.62. The yield on 10-year USTs was stable at 2.75% after a flight to havens sent yields northwards. However, Gold considered as a haven asset as well fell 0.4% to $1,858.20 an ounce. Meanwhile, Brent crude rose 0.9% to $114.62 per barrel amid China covid lockdowns and uncertainties over supply flow due to ongoing war in Ukraine. Focus today will be on Fed minutes as Traders look to out for clues from last meeting for clarity.

The loophole to allow Russia to pay US investors in American Dollars on its foreign debt is due to expire today. It is widely expected that the license would not be extended. Russia is scheduled to make around $100 million in foreign debt payments this Friday and started transferring the money last week to get ahead of new restrictions. Russia said as at the time of transfer that its obligations on the debt were fulfilled, because the funds had gone to the paying agent. Russia Sovereign bonds have been stable ahead of the license expiry with Russia 28 trading in mid 20s and Russia 47 in high teens. At the same time, the Bank of Russia moved its next interest-rate meeting to Thursday as high commodity prices and currency controls have fueled the ruble’s surge against the dollar and Euro. Russian ruble has gained for the 6th day against with USDRUB falling by as much as 1.8% to 55.80 early on Wednesday and EURRUB down 0.7% to 58 level. USDRUB traded below 56 for the first time since February 2018. Russia’s stock market recovered from a four-day decline this morning as oil traded higher. The MOEX Russia Index was up by 0.65% at 2,308 level in early Moscow trading. Energy giants Lukoil and Gazprom were the best performers together with Sberbank and a food retailer Magnit. Russian forces have been amassing near the city of Zaporizhizhia and bombed several other cities in Ukraine overnight. Ukrainian President Volodymyr Zelenskiy said that the Kremlin should pull back its troops to their positions before 24th of May invasion to enable the diplomatic talks.

Bunds open stronger following the trend from yesterday. The 10Y touched a high of 0.973% before dropping to 0.961%, 1bp down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open; 10Y BTPs yields went as high as 2.91% before retreating to 2.87%, 4 basis points firmer intraday. Stocks opened higher as dip buyers returned, attracted by low priced stocks prior to Fed minutes expected later in the day. Consequently, the Stoxx 600, opened higher at 433.95 compared to previous session’s closing of 431.58.

A firm start to the space as treasury yields open steady, some 10bps lower than yesterday’s peak. ANGOL (+0.625pts) leading at the open with NGERIA (+.050pts) in close pursuit as Brent maintains prices north of $110/bbl; short tenors on the latter still maintaining the bid as recovery from last week’s selloff continues. Nigeria also raised its benchmark rate by 150bps to 13%, the first hike since July 2016.

Activity in the Nigerian local Secondary Market for Bonds started off being quiet. However, just before market closed, bearish sentiments surfaced following MPC’s decision to increase interest rates by 150bps from 11.50% to 13.00% at the just concluded meeting. We saw improved offers across board with a few actual selloffs around the long end of the curve. Intraday, average yields were up 32bps across the curve. Consequently, FGN 26s closed at an offer rate of 10.35%, up 25pbs from previous session’s level of 10.10% while 50s closed at an offer rate of 13.02% up 12 bps from previous session’s closing of 12.90%. Secondary Market for Treasury bills had mixed sentiments. We saw pockets of demand trickle in with some bearish undertone seen as well.  Day-on-day, average discount rates were mostly unchanged across the curve. Consequently, discount rate on 8th August 2022 SPEB was at 2.85%   while 14th February 2023 OMO was stable at 4.50%. There will be an NTB Auction on Wednesday 25th May 2022 -a total of N152bn will be offered across the 3 tenors (91, 182 & 364 days). The outcome of the upcoming auction is expected to give market insight into direction on treasury bills rates going forward. The exchange rate between the naira and the US dollar closed at N418.17/$1 at NAFEX compared to previous session’s level of N417.46/$1, a depreciation of circa 0.17%.