Interbank Funding Eased on Strong Financial System Liquidity
Interbank funding rates eased further yesterday, as financial system liquidity opened substantially higher at ₦609.1 billion from ₦470.4 billion.
This happened despite the settlement of the July bond auction which drained ₦177 billion from the system.
The Open Buy Back (OBB) and Overnight (OVN) rates declined by 28 basis points (bps) and 18 bps to 1.60% and 2.20%, respectively.
Chapel Hill Denham said the bullish sentiments extended to yesterday’s session, as investors’ continued to react to the outcome of the July bond auction which held mid-week.
At the front end of the curve, discount rates on benchmark open market operations (OMO) curve compressed by 43 bps to 4.22%, buoyed by the surplus liquidity in the financial system.
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Conversely, the bench-mark Nigerian Treasury Bills (NTB) curve was flat at 2.07%.
Meanwhile, in the bond market, yields compressed across bench-mark tenors by an average of 30 bps to a new low of 6.76%.
Analyst said this was driven by interest across intermediate (-25bps to 6.70%) and long duration (-46bps to 8.85%) bonds.
Barring a cash reserve ratio (CRR) debit by the Central Bank of Nigeria (CBN), the financial system is expected to remain liquid next week, due to an additional bond coupon payment.
Also, a rollover NTB auction is scheduled for next week, with the Debt Management Office (DMO) set to offer ₦269.95 billion across three tenors.
The tenor include ₦49.84 billion of 91-day, ₦54.59 billion of 182-day, and ₦161.52 billion of 364-day papers.
The previous auction cleared at 1.30%, 1.80% and 3.35% respectively.
Meanwhile, the Naira closed flat against the USD in the parallel market at ₦472, while the Investors & Exporters Window rate weakened by 0.4% or ₦1.50 to close at ₦389.50.
The official and SMIS rates were unchanged at ₦381 and ₦380.69 respectively, based on data from FMDQ, although the CBN quoted the official rate at ₦360 on its website.
Interbank Funding Eased on Strong Financial System Liquidity
