Interbank Rates Climb on Financial System Liquidity Swings
Money market rates increased moderately, reflecting a tight liquidity condition in the banking system. Funding pressure has left interbank rates elevated, but improved liquidity conditions reduced negative rate movement slightly.
According to financial market analysts, banking liquidity will feel the impact of N650 billion Treasury bills auction conducted on Wednesday, with projections showing money market rates would climb.
Today, liquidity in the financial system improved, but rates moved the other way, reflecting expectation of a new outflow relating to the Treasury bills auction. The short-term benchmark interest rates in the money market funds space remain attractive and will stay this way even if the CBN cuts rate at its next meeting.
Yesterday, the financial system liquidity improved by 56%, opening at ₦807.98 billion from N519.1 billion. As a result, withdrawals from the Standing Lending Facility of the CBN dropped by 85%, according to TrustBanc Financial Group Limited.
The firm said despite the improvement, interbank funding rates surge ahead of net Treasury bills repayments of ₦466.57 billion. Potentially, the outflow would drive interbank rates above their current levels. Data from the FMDQ platform showed that the repo rate (OPR) rose by 8 bps to 26.50%, and the overnight lending rate (O/N) increased by 9 bps to 26.92%.
The Nigerian Interbank Offered Rate (NIBOR) rose across most tenors, except for the overnight NIBOR, which declined by 0.07% to 26.79%, indicating not so bad liquidity conditions in the banking system.
Liquidity is expected to decrease after debit for TBills, potentially pushing money market rates higher in the absence of additional inflows.
Yesterday, liquidity in the banking system declined by 11%, opening the day with a surplus balance of ₦519.11 billion. # Interbank Rates Climb on Financial System Liquidity Swings anticipated. The asset will fall, and then you will buy when the market has corrected its overvaluation Nigerian Exchange Falls by N73bn as Investors Dump VFD, OANDO
