Analysts Expect Rates to Remain Subdue Until Friday FX Auction
Rates are expected to remain subdued until the foreign exchange auction on Friday, analysts have hinted.
In the money market yesterday, as expected, funding pressures were benign at the start of the trading week, as liquidity was robust in the financial system.
Financial market liquidity opened higher at ₦738 billion from ₦704 billion on Friday.
As a result, the Open Buy Back (OBB) rate eased by 25 basis points (bps) to 1.38%, while the Overnight (OVN) rate was flat at 2.25%.
“Barring a cash reserve ratio debit by the Central Bank of Nigeria, we expect rates to remain subdued, until the retail FX auction on Friday”, Chapel Hill Denham stated in a note.
Meanwhile, the market traded with a slight bullish bias in the fixed income market yesterday.
The Nigerian Treasury Bill (NTB) benchmark curve was unchanged at an average of 2.03%, as slight upward repricing of rates on short-day to maturities (DTMs) was offset by the interest in mid-DTMs.
However, the benchmark open market operations (OMO) curve compressed by 5 basis points (bps) to 2.85%, thanks to the downward repricing of rates on mid (-5bps to 2.96%) and long (-15bps to 3.03%) DTMs.
Chapel Hill said the bond market also snapped a losing streak as duration apathy subsided.
The yield curve compressed by an average of 11bps to 7.78%, with the short (-15bps to 5.41%), intermediate (-15bps to 7.97%), and long (-9bps to 9.92%) end of the curve.
An NTB auction is scheduled to hold on Wednesday, with the DMO offering ₦148bn: ₦4.4bn of 91-day, ₦14.0bn of 182-day, and ₦129.7bn of 364-day bills.
The previous auction closed at 1.15%, 1.80%, and 3.34% respectively.
Based on the calendar, a net NTB maturity is expected (₦20 billion), while liquidity will be further boosted by OMO maturities totaling ₦250 billion on Thursday.
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“As such, we expect the auction to be well bid, while funding pressures should remain minimal until the retail FX auction on Friday”, Chapel Hill stated.
Analysts Expect Rates to Remain Subdue Until Friday FX Auction
