Weekly Market Review: Vol. 93
Prologue
In the just concluded week, reports on the Cash Reserve Ratio (CRR) and from the Federal Account Allocation Committee (FAAC) buttressed suspicion on the shortness of liquidity.
Liquidity for the week (in millions of naira):
Monday – 22-04-2024: -1,010,819.6 — Short.
Tuesday – 23-04-2024: -885,917.99 — Short.
Wednesday – 24-04-2024: -909,899.35 — Short.
Thursday – 25-04-2024: -389,007.44 — Short.
Friday – 26-04-2024: -606,759.35 — Short.
In recent times, on a global scale, there have been forecasts that although the upcoming U.S. presidential election could influence the timing of the next downturn in Iranian exports, Iran’s oil shipments are likely to suffer regardless of who emerges as the next U.S. President.
Analysts highlighted that the existing U.S. policy tools proved effective in driving Iranian exports nearly to zero in late 2020 before changes at the global level and associated implementation strategies altered the scenario. StanChart suggests that while the recent U.S. international oil policies have aimed to mitigate the impact of oil prices, they do not necessarily indicate a policy of minimal pressure on Iranian and Russian oil exports.
Fixed Income
The auction held on Wednesday had an offer of over 140 billion and total sales of over 360 billion, demonstrating that 157% of total sales were made over the actual offer at the close of the NTB auction. When compared to the previous auction, the stop rates remained the same across all curves — 16.2400%, 17.0000% and 20.7000 for the 91-day, 182-day and 364-day, respectively.
Alternative Assets
At the beginning of the just concluded week, Bitcoin had an opening value of almost $65,000 on Monday, traded as high as over $67,208.00 on Monday and closed at $67,766.40 on Friday.
On the night of April 19th, 2024, the cryptocurrency space experienced Bitcoin halving, which simply refers to the process by which the reward for mining new blocks on the Bitcoin blockchain is reduced by half. Experts believe that this event occurs approximately every four (4) years or after every 210,000 blocks are mined. The significance of Bitcoin halving is such that it reduces the rate at which new bitcoins are introduced into circulation, ensuring that the total supply of bitcoins does not exceed 21 million.
In addition, the Bitcoin halving process often attracts the attention of investors and traders, as they can have an impact on the supply-demand dynamic and, consequently, the overarching price of Bitcoin. The last Bitcoin halving was sometime in May 2020 when the reward was reduced to 6.25 bitcoins per block. By implication, the recent halving is rewarded somewhere around 3.125 bitcoins per block.
The goal of the halving is to control the supply of Bitcoin and keep its value stable over time. By reducing the rate at which new Bitcoins are created, BTC is forced to act like a scarce resource, such as gold. As is the usual pattern in this market, where Bitcoin leads, other coins follow.
The world’s second-largest cryptocurrency has shed roughly 20% from its 2024 high. With one month until the SEC’s decision on Ethereum spot ETF applications, Ethereum prices could turn volatile over the next few weeks.
Commodities
Following a series of weeks dominated by political tensions, during which the oil markets were primarily preoccupied with risks such as a potential conflict between Israel and Iran, attention has now shifted back to what lies ahead.
Brent crude has experienced a slight decrease, reaching $86 per barrel — its lowest in April — after reaching as high as $91 per barrel. Market sentiments seem to have primarily dismissed concerns regarding impending Iranian sanctions, viewing them as unlikely to significantly affect oil flows.
In contrast, WTI crude went as high as $87 per barrel sometime in the month and fell to as low as $82. Despite the geopolitical tensions in the Middle East, WTI crude oil maintained the $80+ per barrel levels.
According to Standard Chartered (and reported by oilprice.com), the global oil demand is expected to gain strength in the months of May and June, exceeding 103 million barrels per day for the first time in May, increasing further in June to 103.82 million barrels per day.
Commodity analysts foresee global inventory reductions of 1.53 million barrels per day in May and 1.69 million barrels per day in June, leading to a notable tightening of physical spreads. Moving on, StanChart suggests that OPEC is not certain about boosting production in the immediate future due to the stagnation in the oil price rally, even though it has the capacity for an additional 1 million barrels per day of output in Q3 without augmenting inventories.
What Lies Ahead
The first NTBs auction for May is scheduled for May 9th – ceteris paribus – while the FGN Bonds auction for the second month of Q2 2024 comes up on May 13, featuring the new 5-year April 2029, and the re-opening for February 2031 and February 2034.
On the one hand, during the last two (2) NTB auctions, the stop rates have maintained the same levels across all tenors consecutively; we hope for a break through that ceiling in the forthcoming auction. On the other hand, there is a striking similarity with the FGN bonds auction, save that the April 2029 was a new issue in the last auction.
However, February 2031 saw a 0.25% decline (from 20.0000% to 19.7500%), while the February 2034 decreased by 0.45% (from 20.4500% to 20.0000%). We are hopeful that there could be an increase.
