Interbank Funding Eased on Strong Financial System Liquidity

Interbank Funding Eased on Strong Financial System Liquidity

Interbank funding rates eased further yesterday, as financial system liquidity opened substantially higher at ₦609.1 billion from ₦470.4 billion.

This happened despite the settlement of the July bond auction which drained ₦177 billion from the system.

The Open Buy Back (OBB) and Overnight (OVN) rates declined by 28 basis points (bps) and 18 bps to 1.60% and 2.20%, respectively.Interbank Funding Eased on Strong Financial System Liquidity

Chapel Hill Denham said the bullish sentiments extended to yesterday’s session, as investors’ continued to react to the outcome of the July bond auction which held mid-week.

At the front end of the curve, discount rates on benchmark open market operations (OMO) curve compressed by 43 bps to 4.22%, buoyed by the surplus liquidity in the financial system.

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Conversely, the bench-mark Nigerian Treasury Bills (NTB) curve was flat at 2.07%.

Meanwhile, in the bond market, yields compressed across bench-mark tenors by an average of 30 bps to a new low of 6.76%.

Analyst said this was driven by interest across intermediate (-25bps to 6.70%) and long duration (-46bps to 8.85%) bonds.

Barring a cash reserve ratio (CRR) debit by the Central Bank of Nigeria (CBN), the financial system is expected to remain liquid next week, due to an additional bond coupon payment.

Also, a rollover NTB auction is scheduled for next week, with the Debt Management Office (DMO) set to offer ₦269.95 billion across three tenors.

The tenor include ₦49.84 billion of 91-day, ₦54.59 billion of 182-day, and ₦161.52 billion of 364-day papers.

The previous auction cleared at 1.30%, 1.80% and 3.35% respectively.

Meanwhile, the Naira closed flat against the USD in the parallel market at ₦472, while the Investors & Exporters Window rate weakened by 0.4% or ₦1.50 to close at ₦389.50.

The official and SMIS rates were unchanged at ₦381 and ₦380.69 respectively, based on data from FMDQ, although the CBN quoted the official rate at ₦360 on its website.

Interbank Funding Eased on Strong Financial System Liquidity

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