Money Market: Overnight Rate Rises as System Liquidity Drops

Money Market: Overnight Rate Rises as System Liquidity Drops

Money market rates showed mixed trends, with the overnight rate increasing 3 basis points (bps) to 22.83%, while the open repo rate remained unchanged at 22.50%. 

Funding rates jerked up moderately as financial system liquidity contracted following the latest OMO auction settlement, and the midweek treasury bill auction debit is projected to tighten liquidity further.

The CBN auctioned ₦1.15 trillion in Nigerian Treasury bills across the 91-day (₦150.00 billion), 182-day (₦200.00 billion), and 364-day (₦800.00 billion) tenors to refinance a maturity of ₦765.89 billion. 

Due to primary market auctions during the week, local deposit money banks scale back lodgments at the Central Bank Standing Deposit Facility (SDF) window, though the market experienced limited borrowing from lenders at the same time.

Investment banking firms said in a separate note that liquidity in the financial system moderated to an estimated net long position of ₦3.02 trillion, down from ₦3.39 trillion recorded the prior day.

Further details revealed that placement in SDF also moderated to ₦2.95 trillion, from ₦3.34 trillion previously recorded.

Consequently, the overnight funding rate expanded by +3bps to close at 22.83%, while the open repo rate (OPR) remained firm at 22.50% respectively.

In the Treasury Bills segment, secondary market yields dropped across all maturities, with the 1-month, 3-month, 6-month, and 12-month tenors decreasing by 33bps, 22bps, 30bps, and 42bps, respectively.

The average yield on Treasury bills closed on a positive note, falling 2bps to 17.47%, indicating strengthened investor confidence and a more favorable environment in the secondary market. UBA Climbs to N2.1trn as Investors Bet on Earnings Outlook