April 13, 2018/Cordros Update
Market Commentary
The month of March saw a decline in money market yields due to healthy demand by local and foreign institutional investors and thinning Open Market Operations (OMO) supply by the apex bank.
Sentiments were bullish as the market reacted to higher-than-expected moderation in inflation to 14.33% in February, and a marked reduction in the amount of bills being offered (NGN481bn) vs the amount of bills maturing (NGN964bn), as shown in the Q2-2018 NTB auction calendar.
Primary market treasury bill yields closed at 11.95% for 91-days (previously 11.75%), 13.00% for 182-days (previously 13.00%) and 13.15% for 364-days (previously 13.19%). Thus, sentiments were tilted in favor of secondary market and OMO issuances due to availability of higher asset yields when compared with those on primary market assets.
Secondary market treasury bill yields closed at 14.38% for 91days (previously 14.57%), 14.81% for 182-days (previously 15.54%) and 14.83% for over 200 -days tenor (previously 15.42%).
Market Outlook
After a quarter without a Monetary Policy Committee (‘MPC’) meeting, the Committee eventually met in the month of April, 2018; following the senate’s approval of the appointed Committee members.
In line with consensus expectation, the benchmark policy rate was kept unchanged at 14%.
On the argument to hold, the Committee believes that key macroeconomic variables have continued to evolve in a positive direction in line with the current stance of macroeconomic policy and should be allowed more time to fully manifest.
Our outlook, which posits a downward trend in interest rates, is hinged on moderating inflation in the short term.
However, this view will be limited by expectations of higher inflation in the latter part of the year; on the back of large projected government spending and the need to provide continuous support for a still relatively weak currency.
As such, the Fund Manager will increase fund allocation to high quality money market instruments that offer premium to government treasury bills.
Click here to download full PDF copy of the Cordros Money Market Fund factsheet for March 2018
