Funding Rates Mixed, OMO Bills Debit Squeezes Financial System

Funding Rates Mixed, OMO Bills Debit Squeezes Financial System

Funding rates were mixed as the settlement of open market operations (OMO) conducted by the Central Bank of Nigeria (CBN) reduced liquidity strength in the financial system.

In its investor note, investment banking firm AIICO Capital Limited reported that the system liquidity dipped by N874.3 billion to N1.1 trillion. The financial system dropped primarily due to outflow relating to the settlement of the previous session’s OMO auction conducted by the Apex Bank at the beginning of the week.

The pressure eased moderately as N41.3 billion in inflows from local bond coupons boosted liquidity position, but it was significantly insufficient to redirect money market rates. Money rates were mixed as the Open Repo Rate (OPR) held steady at 26.50%, while the Overnight (O/N) rate declined slightly by 4 bps to 26.96%.

The banking system anticipates a total inflow of N185.9 billion to hit the financial system on Wednesday, while an outflow relating to the settlement of the Debt Management Office’s monthly bond auction payment is expected to leave the financial system dry.

Nigerian Interbank Offered Rates (NIBOR) advanced across most tenors, except for the overnight rate, which dipped by 2 bps to 26.88%, system liquidity conditions, Cowry Asset Limited said in a note.

The Nigerian Treasury Bills (NITTY) curve witnessed yield increases across most maturities, reflecting a shift in investor sentiment. Despite the rise in yields, secondary market activity improved, with sell-side pressures driving the average yield up by 2 basis points to 17.66%. #Funding Rates Mixed, OMO Bills Debit Squeezes Financial System Naira Drops Value Against Dollar as FX Demand Rises