Auction: CBN Hikes Rates on OMO Bills, Raises N1.16 Trillion
The results of the most recent primary market auction revealed that the Central Bank of Nigeria (CBN) increased the spot rate on its one-year open market operations bills (OMO) by 99 basis points to 22.49%.
As part of efforts to mop up liquidity in the financial markets, the apex bank conducted OMO bills auction on Friday amidst changing market dynamics. The latest adjustment to benchmark interest rate reflected in the spot rates pricing. At the short end, OMO bill rate rose marginally as subscription came above what the apex bank offered. On the other hand, the spot rate of the mid-tenor OMO bills instrument decreased somewhat.
The CBN offered N500 billion across all standard maturities in the primary market, according to details from the auction book. The auction came two days after the authority mopped up liqudity from the market via Treasury bills sales. CBN offer for subcriptions was split into N75 billion for the 95-day OMO bills; N75 billion for the 179-day and N350 billion for the 361-day.
Demand was healthy as total subscription settled at N1.16 trillion, translating to bid-to-offer of 2.3x, traders said. The CBN allotted all available bids across the standard tenors at the auction, according to Cordros Capital Limited. The CBN sold N10 billion worth of 95-day OMO bills, N5.65 billion worth of 179-day bills were allotted, and N1.14 trillion worth of 361-day bills were sold to investors, per the auction results.
Overall, stop rates for the 95-day OMO bill cleared at 18.99%, up from 19%. While the 361-day was allotted at a rate of 22.49%, an increase from 21.50% in the previous auction, the apex bank priced the 179-day at a spot rate of 19.74% from 19.48%. Meanwhile, liquidity pressures in the money extended to the close of business on Friday.
The short term benchmark interest rate rose sharply in the absence of significantly inflows into the system. A total of N1.16 trillion debits for the OMO auction plunged liquidity level lower. Data from FMDQ securities exchange showed that interbank rates edged higher.
The open repo rate surged by 68bps to 32.4%. Also, the overnight lending rate surged and 66 basis points to 33.0% as system liquidity weakened. #Interest Rate on OMO Bills Rises to 22.49% Interest Rate on Nigerian Treasury Bill Spikes to 21.45%
