US equities rise, bonds yields steady as inflation worries wane

U.S stocks ended higher Wednesday after minutes of the Fed Reserve’s June policy meeting released signalled another big interest rate-hike is likely to come. Fed officials said, ‘recognized policy firming could slow the pace of economic growth for a time’. They also indicated another large rate hike of 50 basis points or 75 basis points is likely to be approved later this month. Subsequently, the Dow Jones increased 0.2% to finish at 31,037.68, S&P 500 increased 0.4% to finish at 3,845.08 while, Nasdaq 100 increased 0.4% to finish at 11,361.85, its third day in a row gain. The 10-year yield UST was little changed at 2.94%. Gold price declined $13.80 to $1,750.10 per ounce while WTI crude oil declined 97 cents to $98.453 per barrel.

The US and its allies are exploring the possibility of putting a cap on the price of Russian oil between $40 and $60 a barrel as Russia continues to make more than $600 million a day from its oil exports proceeds. Meanwhile Russian troops redoubled its push for Ukraine’s Eastern Donbas region on Wednesday with the Ukrainian military claiming to have repelled some Russian advances. Russian stock market fell this morning as shares of energy companies declined. IMOEX was 0.3% down at 2215 with Tatneft and Gazprom leading the losses. Russian rouble has also extended its losses and currently trades at 63.33 roubles per US Dollar and 64.16 against the Euro. The recent strong movement in Russian currency were mostly attributed to increased speculative activities in anticipation of government foreign exchange interventions. Another possible reason was a substantial rouble payment made by VER.RF, a Russian state development corporation. The investment company has transferred the equivalent of $30.1 million in roubles in coupon payments and $1 billion in debt principal, which led to hasty purchases of currencies. Russian sovereign bonds remained mostly unchanged with Russia 28 offered in mid 30s and Russia 47 in high 20s.

Bunds open weaker following trend from yesterday. The 10Y touched a high of 1.27% before dropping to 1.26%, 1bp down day-on-day. Peripherals mirrored the move on bunds with a relatively weak open;10Y BTPs yields went as high as 3.15% before retreating to 3.13%, 2 basis points firmer intraday. Stocks open higher as investors focus on the earnings season, putting aside for now possibility of an economic downturn. Consequently, the Stoxx 600, opened higher at 412.91 compared to previous session’s closing of 407.34.

A weaker open to SSA as the double whammy of falling Brent prices and rising rates puts a damper on the space. The GHANA rally also comes to a halt with bonds having surged as much as 10pts since Friday last week. The curve leads the selling, down 0.50pts at the open.

Activity in the Nigerian local Secondary Market for Bonds had bearish sentiments as a fallout of weakening system liquidity. We saw improved offers across the curve as Banks modified their rates upwards to reflect tightness in the money market. Intraday, average yields were up by 13bps across board. Consequently, FGN 26s closed at an offer rate of 10.28%, 7 basis points up from previous level of 10.21% while 50s closed at an offer rate of 13.00% from a previous level of 12.97%. Activity in the Secondary Market for Treasury bills remained bearish amid dwindling Money Market liquidity. Selloffs by Banks were sustained especially on the SPEB as level of system liquidity worsened. Day-on-day, average discount rates were elevated across the curve. Consequently, discount rates on 8th of August 2022 SPEB & 29th of August 2022 SPEB were at 10.50% (previous: 8.00%) and 10.55%(previous:9.50%) respectively. Liquidity tightness is expected to continue pending inflows from OMO maturities & Bond coupon payments. Finally, the exchange rate between the naira and the US dollar closed at N426.63/$1 at NAFEX compared to previous session’s level of N425.44/$1, a depreciation of circa 0.28%.