Interbank Rates Decline to Single Digit as Liquidity Improves
Interbank funding rates dropped to single digits today as funding pressures eased substantially, thanks to open market operations (OMO) maturities totaling N180.6 billion that hit the system.
The Open Buy Back and Overnight rates declined by 740 basis points (bps and 720 bps to 5.60% and 6.30% respectively.
Chapel Hill Denham said settlement of the August bond auction will likely drain liquidity tomorrow, but the firm said it expects funding pressures to remain benign ahead of the Federal Account Allocation Committee payment for the month.
In the fixed income market, analysts said sentiments were mixed but tilted towards a bearish bias, as investors were expectedly jittery following a somewhat neutral outcome of the monthly bond auction yesterday.
Meanwhile, in the treasury bills market, discount rates on benchmark bills expanded by an average of 7bps to 1.70%, as short (+20bps to 1.45%) and mid (+6bps to 1.35%) DTMs repriced higher.
The OMO segment was mixed, as upward repricing of short DTMs (+43bps to 3.65%) was offset by interests in long (-30bps to 3.64%) days to maturity (DTMs).
Hence, the benchmark curve was broadly flat an average of 3.69%, analysts at Chapel Hill stated.
Also, in the bond market, yields expanded by an average of 11bps across benchmark tenors to 7.82%.
Analysts explained that this was driven by bearish sentiments across intermediate (+14bps to 7.25%) and long (+11bps to 9.36%) term bonds.
Despite the bearish sentiments today, Chapel Hill’s analysts expect the market to remain well bid in the near term, due to increase in the frequency and size of OMO maturities.
“We expect FAAC allocation for August to hit system anytime from now.
Read Also: Terrible Unemployment Rate Suggests Need for Reforms – Analysts
“From a more strategic longer term perspective, we expect portfolio managers to being to position their portfolios for increase in short and long term rates, ahead of the regime change in the OMO market by October”, analysts said.
Interbank Rates Decline to Single Digit as Liquidity Improves
