Money market upbeat on strong system liquidity
The money market activities remained generally upbeat throughout the week, despite an open market operations (OMO) auction for instruments worth N166.6 billion.
The short and mid tenor instruments were under-subscribed with bids-offers settling at 0.15x and 0.03x respectively for the 93-day ( with N7.4 billion offered and subscription of N50.0 billion at 11.80% stop rate – 11.800%) and 184-day ( with N50.0 billion offered, and N0.5 billion subscription at 12.90% stop rate) instruments.
However, the 359-day instrument was 2.8x oversubscribed, with N100 billion offered and N284.5 billion subscribed at a 13.029% stop rate.
Also, in the Treasury bills secondary market, activity was bullish, with the average yield on instruments declining on all trading days of the week, except the 26th of April, to settle 0.14% lower week-on-week at 13.1%.
“We expect market activities to remain bullish at the start of the week, given the long position of the financial system (N267.1 billion; 26-04-19)”, Afrinvest noted.
In the money market, rates – Open Buy Back (OBB) and Overnight (OVN) – undulated through the week, increasing by the close of the first trading day to settle at 17.3% and 18.2% respectively.
However, by midweek (25-04-2019), rates had declined to 6.1% and 7.3% before rising to 16.4% and 17.3% by the close of the week, as the market was affected by shifting dynamics in system liquidity.
Hence, the OBB and OVN rates were up 6.6ppts and 6.7 ppts, respectively, compared to the prior week’s close of 9.9% and 10.6%, respectively.
Afrinvest said, “This week, we expect instruments worth a combined N172.5 billion to mature on the 1st (N109.7 billion) and 2nd (N62.8 billion) of May, which should enhance system liquidity in the shortened week.
Hence, we anticipate an OMO auction from the CBN at the start of the week, given the system’s long position, as well as another auction when the financial market reopens on the 2nd of May to manage system liquidity, which should also help keep market yields moderated.
