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Offshore Investors Rally 10-Year Bond following Decline in CPI Inflation

Welcome to Nairametrics‘ summary of the daily performance of major economic indicators and highlights from trading sessions and key statistics such as Treasury Bills and Bond. This is brought to you by Zedcrest.

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Treasury Market T-bills

Welcome to Nairametrics‘ summary of the daily performance of major economic indicators and highlights from trading sessions and key statistics such as Treasury Bills and Bond. This is brought to you by Zedcrest.

This report is dated July 15th, 2019.

***Nigerian consumer inflation falls to 11.22% in June*** – NBS

Bonds: Demand Interests remained stable in the FGN bond space, with yields relatively unchanged on the day, as market players remained cautious ahead of the Q3 FGN Bond Calendar release. We, however, witnessed some offshore interest around the 10-Year bucket, with yields lower by c.26bps on the 2028s, following the 18bps decline in the Headline Inflation Index released earlier in the day.

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We expect the market to remain slightly bullish, with demand interests expected to be sustained from the c.N100bn bond coupon payments this week.

Treasury Bills: The T-bills market remained bullish, with yields lower by c.20bps on the day, as demand interest was bolstered by the surplus system liquidity levels and continued lack of OMO auction by the CBN. Demand interests remained focused around the mid to long end of the curve.

[READ: Capital Inflow Hits Highest Level Since Q3 2014]

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We expect yields to remain slightly bullish, as market players anticipate the c.N108bn NTB auction on Wednesday.

Money Market: Rates in the money market remained relatively stable on the back of the robust system liquidity levels. The OBB and OVN rates consequently ended the session at 2.71% and 3.43%, with system liquidity currently estimated at c.N245bn positive.

We expect rates to remain stable as there are no significant outflows anticipated.

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Stanbic IBTC

FX Market: At the interbank, the Naira/USD rate fell by 5k to N306.95/$ (spot), with SMIS rate also lower by 2k to N357.70/$. The NAFEX rate at the I&E window rose markedly higher by 31k to N361.10/$, whilst the market turnover rose by c.70% to $161m. At the parallel market, the Cash rate dipped by 40k to N358.10/$, while the transfer rate remained stable at N361.50/$.

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Eurobonds: There was renewed interest in the NIGERIA Sovereigns, with yields lower by c.5bps on the day. We witnessed the most interest on the long end (32s – 49s) which gained c.0.5pct during the session.

In the NIGERIA Corps, yields remained relatively stable across the traded securities.


Contact us: Dealing Desk: 01-6311667 Email: [email protected]

Disclaimer: Whilst proper and reasonable care has been taken in the preparation and accuracy of the facts and figures presented in this report, no responsibility or liability is accepted by Zedcrest Capital or its employees for any error, omission or opinion expressed herein. This report is not an investment advice or a research recommendation and should not be regarded as such. The information provided herein is by no means intended to provide a sufficient basis on which to make an investment decision.

[READ FURTHER: Nigerian Eurobonds Maintain Strong Rally as Global Central Banks Turn Dovish]

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Around the World

US Capitol complex temporarily shut down

The US Capitol complex was shut down temporarily on Monday as a precautionary measure after a small fire broke out nearby.

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The US Capitol complex was shut down temporarily for about an hour on Monday as a precautionary measure after a small fire broke out nearby, highlighting the security concerns that are being raised days before the inauguration of President-elect Joe Biden.

The security concerns and the lockdown follows the January 6 attack on the US Capital by supporters of the outgoing US President, Donald Trump, after his encouragement and inciting comments, calling the Presidential election a fraud without any proof of evidence.

READ: President Trump says he won’t attend Joe Biden’s inauguration

Some of them even called for the death of the US Vice President, Mike Pence for presiding over the certification of Joe Biden’s November election victory.

While making the disclosure in a statement, the Capitol Police said that the lockdown has been lifted and the nearby fire contained.

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The Acting Chief of the Capitol Police had said that the complex which comprises of the Capitol, its grounds and several buildings were shut down as a precautionary measure.

READ: US Supreme court dismisses Texas bid to overturn presidential election results

The US Secret Service in a tweet post on its official Twitter handle said, “Out of an abundance of caution the U.S. Capitol complex was temporarily shutdown. There is no threat to the public.’’

The city’s fire department in its tweet post said that firefighters put out a fire outside near the Capitol complex.

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The fire department said, “There were no injuries. This accounts for smoke that many have seen.”

READ: Huawei accuses the United States of hacking

What you should know

  • President-elect, Joe Biden is expected to be sworn in at the US Capitol on Wednesday amid an unprecedented cordon of security, with strict physical distancing measures in place due to threats of violent attacks in Washington and the rising cases of coronavirus infections.
  • Donald Trump, who is just fresh from a historic second impeachment from the congress had said he would not attend, although his deputy, Vice President Mike Pence, had given an indication that he would attend.

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Corporate Press Releases

Kinyungu Ventures Research calls for changes to cut-and-paste VC strategy in Africa

The Paper recommends investment structures and approaches tailored to African operating conditions.

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East African venture advisory firm, Kinyungu Ventures has published a white paper Chasing Outliers: Why Context Matters for Early Stage Investing in Africa that has found that there continues to be a wide misalignment between traditional venture capital models and the African market. The team behind the report is now calling for a broadening of approaches to institutional investment on the continent. Speaking with 100 Pan-African founders, investors, and LPs across 15 African countries, the research suggests investors should prioritize investing structures and practices that reflect the realities of operating in Africa. This includes adopting more flexible investing structures with longer time horizons.

According to the paper, there are multiple mismatches between key characteristics of Silicon Valley VC and African markets, which influence how startups and funds maneuver as well as what results they expect and produce. Findings show that African markets are large, but also fragmented, and its consumers have limited purchasing power. Furthermore, consumers on the continent are difficult to acquire and retain, yet the sheer size of the African market also presents a real opportunity for profit once the environment is clearly understood. The paper’s key recommendations for funds include:

  • Adopting more focused investment strategies, such as investing in b2b companies or cross-subsidizing a portfolio with less risky, steady return assets.
  • Considering non-unicorn investing models geared at more resilient companies, with returns distributed more widely across the portfolio
  • Using flexible structures such as debt or PCVs to accommodate market-level changes, where feasible
  • Allowing a longer time horizon for returns, understanding that growth could be slow and difficult to achieve for many companies

Kinyungu Ventures catalyzes resilient businesses for local intergenerational prosperity. The East African-centric investor focuses on entrepreneurship in East Africa, startups, seed funding, debt financing, impact investing and angel investing.

Speaking on the launch of the white paper, Tony Chen, Managing Director of Kinyungu Ventures and co-publisher of the report says, “Capital in Africa is scarce and pursuing a “growth at all costs” strategy where capital pools are shallow presents huge risks for companies. We’ve also found that many great businesses don’t fit the typical VC profile, but have tremendous unfulfilled potential”.

Tayo Akinyemi, lead researcher and writer of the report added: “In our conversations with numerous investors and founders, it is clear that nuances in variables such as consumer behavior, cultural norms, and business practices impact startups significantly and being on the ground is crucial for success. While African markets aren’t always able to provide the outsized returns that Silicon Valley typically looks for in high-growth companies, a more focused strategy here could unlock real gems, as has been proven by some of the startup successes the continent has seen over the years.”

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Companies

Neimeth Pharmaceuticals to raise N5 billion in additional equity

The Board of Neimeth is set to raise N5 billion additional equity upon the approval by shareholders of the company at the AGM.

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Neimeth Pharmaceuticals
The Board of Directors of Neimeth Pharmaceuticals has revealed plans to raise N5 billion in additional equity upon approval by shareholders of the company.
The information was contained in a press release published on the NSE and signed by the Company Secretary, Mrs. Florence Onhenekwe.

The disclosure is part of the resolutions reached at the Board of Directors meeting of 15th January 2021. At the end of the meeting, it was resolved that the company would raise additional equity to the tune of N5 billion.

In line with this development, a board resolution proposing to raise equity will be presented at the Annual General Meeting of the Company scheduled to hold on 9th March 2021.

What you should know

  • The Board of the Company is yet to disclose if the additional equity would be a rights issue or a private placement, as the details of the additional N5 billion equity set to be raised are yet to be finalized.
  • The fund will help the company’s management to execute key strategies that will reposition the company as a leader in the healthcare industry, with the hope to deliver better returns on investment to shareholders.
  • The additional equity financing will also increase Neimeth’s outstanding shares, which will dilute earnings and impact the Company’s stock value for existing shareholders.
  • The move has the potential to trigger a sell-off of the company shares on the Nigerian Stock Exchange.

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