Tight Liquidity in Financial System Keeps Rates Uptrend
The sustained liquidity strain in the money market kept short term benchmark interest rates uptrend, traders said, noting the effect could be positive on mutual funds.
Rates movement was negative impacted by low inflows from maturing instruments. Though, the market expects inflows from OMO bills and FGN coupon payments to boost liquidity level in the financial system.
In the recent past week, money market rates remain elevated as banks queue as the Central Bank of Nigeria (CBN) standing lending facility window to meet short term funds requirements.
System liquidity as negative throughout the week, with most deposit money banks (DMBs) experiencing increasing exposure to the SLF window.
Interbank rates – open repo and overnight lending rate rose by 20 bps and 19 bps, respectively, to settle at 31.20% and 31.73%.
“We anticipate ample system liquidity due to inflows from FGN bond coupons”, AIICO Capital Limited said in a note.
The overnight lending rate inched higher by 7bps week on week to 31.7% despite the inflow from OMO maturities worth N35.20 billion, Cordros Capital Limited said.
The investment banking firm told investors that average liquidity position remained positive, closing at a net long position of N612.68 billion from net long position of N198.32 billion in the previous week.
“We envisage moderation in the overnight lending rate as we believe the combined inflows of N452.75 billion from FGN bond coupon payments totaling N442.75 billion and OMO maturities in the sum of N10.00 billion will boost liquidity in the financial system”. #Tight Liquidity in Financial System Keeps Rates Uptrend
