US equities finished higher as traders reflected on Fed Minutes that did not indicate a more aggressive rate hike campaign to tackle inflation coupled with a gloomy economic outlook for China. Consequently, the S & P 500 gained 0.95%% to close at 3,978.73, NASDAQ 100 rose 1.51% to close at 11,343.74 while DOW increased by 0.60% to close at 32,120.28. The yield on 10-year USTs declined 3pbs to 2.72% as investors took solace from the Fed minutes that didn’t suggest an even more assertive track to tackle inflationary pressures emanating from elevated commodity prices. Meanwhile, Brent crude rose 0.5% to $114.56 per barrel, at the same time, Gold fell 0.3% to $1,847.86 an ounce.
Russia said it would open its corridors for shipping from seven Ukrainian ports, which should ease an unfolding food crisis triggered by a blockade. Meanwhile, Ukrainian Foreign Minister Kuleba commented at an Economic Forum in Davos that peace negotiations were going “nowhere”. After yesterday’s expiry of US treasury license for Russia to pay in US Dollars on its foreign debt, Russia announced that it would service its dollar debt in rubles. A payment in rubles would breach the terms on 2026 Dollar bond with coupons due this Friday and would trigger a 30-day grace period before Russia could slip into default. Russia’s Finance Minister Siluanov said that Russia has money and willingness to pay but prevented from doing so by an “unfriendly” nation. Russian sovereign bonds have remained mostly stable after the news with Russia 28 trading in mid 20s and Russa 47 remaining in high tens. After a long streak of advances, Russia announced an emergency monetary policy meeting on Thursday. Ruble lost some value on Thursday morning trading with USDRUB at 60.80 and EURRUB at 62.83. Economists widely expected Russia to slash rates again with some predicting a rate cut of 2-3%. Consequently, news came out with Russia cutting interest rates down to 11%. Ruble has moved lower post the announcement with USDRUB now trading above 61 and EURRUB above 63. Russian stocks have risen for the second consecutive day in line with oil prices. IMOEX traded 1.41% up this morning at 2,373 with energy giants Gazprom, Lukoil and Norilsk Nikel being the main drivers.
Bunds open stronger following the trend from yesterday. The 10Y touched a high of 0.944% before dropping to 0.914%, 3bps down day-on-day. Peripherals mirrored the move on bunds with a relatively strong open; 10Y BTPs yields went as high as 2.86% before retreating to 2.79%, 7 basis points firmer intraday. Stocks opened higher as investors considered cheaper valuations versus risk of hawkish Fed. Consequently, the Stoxx 600, opened higher at 435.40 compared to previous session’s closing of 434.31.
Another firm start to the space led by KENINT (+0.375pts) as treasuries have remained steady. KENINT continues in strength having outperformed in Wednesday’s session, up 2.50pts. NGERIA also saw continued steepening as short to belly tenors were lifted, trading 2.00pts up.
Activity in the Nigerian local Secondary Market for Bonds was relatively bearish following yesterday’s hike in interest rates by the MPC coupled with frail system liquidity. We witnessed some sell offs across the curve with few trades consummated. Intraday, average yields were up 7bps across the curve. Consequently, FGN 26s closed at an offer rate of 10.55%, up 20pbs from previous session’s level of 10.35% while 50s closed at an offer rate of 13.08% up 6bps from previous session’s closing of 13.02%. Secondary Market for Treasury bills was tepid with a bearish undertone as Money Market remained relatively weak at circa N67bn. Day-on-day, average discount rates were mostly unchanged across the curve. However, stop rate for the new 1-year NTB rose to 6.49% from previous level of 4.70% as market reacted to the recent interest rate hike. Consequently, discount rate on 11th July 2022 SPEB was at 2.80% while 3rd October 2022 SPEB was stable at 3.08%. The exchange rate between the naira and the US dollar closed at N418.00/$1 at NAFEX compared to previous session’s level of N418.17/$1, an appreciation of circa 0.04%.