Funding Rates Jump as System Liquidity Tightening Persists

Funding Rates Jump as System Liquidity Tightening Persists

Funding rates jump Thursday as financial system liquidity persist, having opened lower at N291.6 billion from N353.4 billion yesterday. Money market rates have been making an upward trend in recent time reflecting uncertainty following monetary policy decision to hold key policy rates.

The tightening however reflects the impact of the Central Bank of Nigeria’s (CBN) open market operations (OMO) sale  worth N100 billion and net Treasury Bills sale of N49.2 billion, according to Chapel Hill Denham..

Analysts registered in a report that financial system liquidity was further tightened by provisioning by deposit money banks for the retail FX auction.

Against this backdrop, funding rates spiked, as the Open Buy Back (OBB) and Overnight (O/N) rates jumped to 30.00% and 32.50% from 8.25% and 9.25% respectively.

Meanwhile, the Nigerian fixed income market traded mixed today.

At the front end of the curve, the Treasury bills benchmark curve closed flat at an average of 3.82%, while OMO curve eased by an average of 4 basis points (bps) to 6.06%.

Nevertheless, bond yields expanded by an average of 6bps to 10.48%, due to repricing at the intermediate (+13bps to 10.98%) and long (+3bps to 11.71%) end of the curve.

At the Treasury bill auction yesterday, the Debt Management Office (DMO) offered a total of N95.68 billion across three tenors, while demand was strong with a total subscription of N212.59 billion.

The outturn implies a bid-cover ratio of 2.2x from 2.5x previously. The 91-day and 182-day stop rates were unchanged at 2.00% and 3.50% respectively, while the 364-day stop rate jumped by 100bps to 8.0%.

In related development, the Nigerian local currency, Naira, weakened against the United States dollar in the Investors and Exporters window, albeit marginally, by 15bps or 63 kobo to 409.30.

In the parallel market, the Naira strengthened by N1.00 or 0.2% against the dollar to 485.00. However, the exchange rate remained unchanged in the official and Secondary Market Intervention Sale (SMIS) segments at 379.00 and 380.69 respectively.

External reserves maintained the recent upward trend, but ended the month down by 0.8% month-on-month to US$34.8 billion on March 31st 2021.

Equities Market

Nigeria’s equity benchmark index extended its bearish run for the third straight session, with today’s loss stemming on the back of losses in some heavyweight names.

Notably, the Nigerian Stock Exchange All-Share Index dipped by another 33bps to 38,916.74 points. Against that backdrop, year to date loss expanded to 3.36% as market capitalisation declined to N20.361 trillion.

Read Also: Yield on T-Bill Hits 4% as Bonds Sell-off Persists

Funding Rates Jump as System Liquidity Tightening Persists