A Financial Analyst and Portfolio Manager at SIC Financial Services Limited, Mr. Isaac Kwasi Mensah, has projected that the Bank of Ghana’s Monetary Policy Committee (MPC) outcome is likely to drive domestic bond sales this week.
Mr. Isaac Kwasi Mensah made this known in an exclusive interview with the Vaultz News. According to the analyst, as investors await the final decision of the Monetary Policy Committee this week and with many experts predicting a rate hike, investors are in a waiting queue to cash in on the possible new rate. Consequently, in the fixed income market, he said he expects a bullish sentiment to rule the market in the coming weeks.
“I anticipate keen trading in the Ghanaian Treasury Bills segment as investors hold their breath for the outcome of the Monetary Policy Committee (MPC) meeting for rate direction.
“Last week, liquidity condition declined due to minute inflows from coupon payments, and as such, funding rates are anticipated to rise. Meanwhile, interest in the secondary market, like the stock market, is likely to go down due to shifting of attention to the primary market.”
Mr. Isaac Kwasi Mensah
Taking a snapshot of the weekly activity shows that the fixed income market traded largely bearish, with yields trending upwards in the bonds and Ghanaian Treasury Bills spaces.
At end of last week, the Treasury bill bids were undersubscribed causing the government to fall short of its target for the week at the latest Government of Ghana (GOG) Securities Auction.
Mr. Isaac Kwasi Mensah explained that the reason for the low subscription may be due to the recent inflation rate in the country.
“As the interest rates on the short-term securities remain much lower than the inflation rate, which currently stands at 23.6 percent, it will not be prudent to buy those securities. As such, investors shifted their interest to the secondary market in search of higher yields.
“As I said earlier, they may also be waiting for the MPC report to enter the market this week. So, ahead of the next primary market auction [this week], the MPC rate, which is likely to go up maybe a market catalyst to drive activities.”
Mr. Isaac Kwasi Mensah
In the Forex Market
In the forex market, the analyst bemoaned the high rate at which a cedi is exchanged for the dollar. In the intervening time, he hopes that the BoG with this MPC meeting will help solve the high inflation and the depreciation in the country.
“The widening FX gap between the official exchange rate and the parallel market has remained a high point of concern for both importers and traders alike. The local currency continues to grapple with strength against the dollar across various FX segments in the face of policy normalization by the Bank of Ghana and ahead of the final decision by MPC meeting headed by the BoG governor this week.”
Mr. Isaac Kwasi Mensah
Meanwhile, the dominant exchange rate across the different FX segments of the market was bearish as at the parallel market segment of the market last week, the cedi ended the week, Friday, 20th March, 2022 trading at GH¢7.12 per dollar on the Interbank market. However, in a forex bureau, it was bought at GH¢7.90 and sold at the rate of GH¢8.10.
Mr. Isaac Kwasi Mensah, meanwhile, is optimistic that the bank of Ghana with the new policy rate will be able to tame the escalating inflation coupled with the fast depreciation of the cedi. He thus, said, “Oh yes, I have utmost faith in the Bank of Ghana to bring the best policies to control inflation and depreciation issues.”
The Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) commenced its 106th Regular Meetings on Wednesday, May 18, 2022, to review developments in the economy. The 3-day Meetings will be concluded with a press conference on Monday, May 23, 2022, to announce the decision of the Committee.
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