|Indices||Present Situation||Expected for May||Expectations||Rate Direction||Weight (100)|
|GDP Growth Rate||Low||Positive||1.92% +/-20bps||10|
|Reserve Level||High||Positive||$48.55bn +/- $400m||10|
|Market liquidity||Positive||Positive||N145bn +/- N50bn||5|
|Crude Oil prices||High||Neutral||$75+/- 5||15|
|FPI Inflow||Poisitive||Lower||$1.2 billion +/- $200m||20|
|Fed Rate||Rising||Neutral||2.00% +/- 0.25%||15|
|Geopolitical Policies||Rising||Higher||6 +/- 0.5||10|
The table above indicates improving trend in key factors for rate movement downwards. With the anticipation of continued decline in headline inflation and possible easing of monetary policy later in the year, this is expected to keep rates and yield levels in the fixed income low.
While we see the CBN loosening its current monetary policy stance to an accommodative one in 2018, we do not anticipate this at the next MPC meeting in May. We also expect the interventions in the FX market to be sustained. Inflows from OMO maturities, bond coupons and FAAC distributions would provide bigger respites for rates, matched with government’s low appetite for high cost debt. As the DMO continues to push for lower rates in the fixed income market, with possible alignment of the CBN’s monetary policy, we expect to see high demand in May. We also expect T-Bills rate levels at the PMAs to remain below 13% levels, as well as yield levels at the long end, to hover 12% – 13.5%.