15 December 2015, Lagos – A total inflow of about N890 billion is expected to hit the money market from the various maturing government securities and Federation Account Allocation Committee (FAAC) this month, a report by FSDH Merchant Bank Limited has revealed.
On the other hand, the report stated that expected outflows from the various sources such as government securities and statutory withdrawals this month are estimated at N577 billion, leading to a net inflow of about N312 billion.
However, this analysis does not include the Central Bank of Nigeria’s interventions at the interbank segment of the foreign exchange market and the cash reserve requirement (CRR).
The report also stated that the market was expected to remain relatively liquid this month, except the CBN conducts open market operations (OMO) to mop up.
It also anticipated that yields on the fixed income securities may increase marginally in the month of December 2015, stating that a higher increase in the longer dated securities would be more likely than on the shorter dated securities.
The higher yields would be driven by the need to maintain positive real yield, the expectation of an increase in the Fed Rate in the United States and the impact of the FGN fiscal deficit for 2016.
Meanwhile, the implementation of the treasury single account (TSA) may keep the Nigerian treasury bills yields lower than the historical levels.
According to the report, the current state of the market shows there are opportunities at the longer end of the market.
The average yields on the FGN Eurobonds were higher in November 2015 than in October 2015. Consequently, the prices of all the bonds closed lower in the month of November, compared with October 2015.
“We expect the yields to rise higher in the month of December because of the macroeconomic risks the Nigerian economy still faces in the short-term. This is in addition to our expectations that dollar-denominated yield may increase because of the possibility of rate hike in the US,” it added.
- This Day