Interbank Rates Increase as NTB Outflow Heats Up Liquidity
The short-term benchmark interest rates trended higher in the money market as banks faced liquidity constraints that kept funding rates elevated on the back of the settlement for the Nigerian Treasury bills (NTB) auction.
The tight condition experienced yesterday triggered borrowings in the absence of significant inflows from maturing instruments to reflating liquidity balance in the financial system.
Money market rates are expected to remain on the high end as the market anticipates the naira equivalent settlement for $11.5 million FX intervention sales to banks on Friday to heat up liquidity conditions.
In the money market, the Nigerian Interbank Offered Rate (NIBOR) declined, reflecting improved liquidity conditions within the banking system. The outflow for the Nigerian Treasury bills auction conducted on Wednesday drained the liquidity level in the financial system.
The pressures led banks to maintain their borrowing activities in the Central Bank of Nigeria’s (CBN) standing lending facility (SLF) to meet their respective funding obligations. Most of the active borrowers were tier-2 banks, analysts said, noting that some cash-rich lenders took advantage of the market conditions and demanded higher rates.
In an update, CardinalStone Limited told investors that system liquidity was strained following the settlement of N670 billion Treasury bills auction. Hence, banks queued up at the CBN discount window and net borrowed N1.02 trillion, analysts said.
As a result of this, key money market indicators trended upward, with the Open Repo Rate (OPR) and Overnight Lending Rate rising by 0.19% and 0.65%, respectively, to close at 32.29% and 32.65%. #Interbank Rates Increase as NTB Outflow Heats Up Liquidity Yield Declines as Investors Bullish on Nigerian Bonds
