Interbank Rates Ease Further on High Liquidity as DMO holds Auction

Interbank Rates Ease Further on High Liquidity as DMO holds Auction

Interbank funding rates eased further on Tuesday, as financial system liquidity opened higher at ₦234 billion from ₦195 billion in the previous day.

The Overnight (OVN) and Open Buy Back (OBB) rates declined by 100 basis points (bps) and 87 bps to 2.00% and 3.13% respectively.

We expect funding pressures to remain minimal this week, supported by net Nigerian Treasury Bills (NTB) maturity worth ₦20 billion and Open Market Operations (OMO) maturities estimated at ₦133.97 billion on Thursday“, Chapel Hill Denham said.

Meanwhile, analysts said investors sentiments were broadly mixed in the fixed income market.

In the NTB market, discount rates on benchmark bills expanded by an average of 4bps to 1.94%, amid repricing of short (+17 bps to 1.25%) and long (+3 bps to 2.69%) day to maturity.

Read Also: Funding Pressure Benign as Financial System Liquidity Drops

Contrarily, the OMO benchmark curve compressed by 2 bps to 2.09%, driven by long (-11bps to 2.25%) day to maturities.

In the bond market, analysts also said yields compressed by an average of 34 bps across the benchmark curve to 6.45%.

This was mainly due to positioning in short and intermediate bonds, while duration apathy was observed as long term bonds by 5 bps to 8.80%.

Chapel Hill Denham said the renewed apathy for duration suggests investors may already be positioning for the peak of the bond rally.

Interbank Rates Ease Further on High Liquidity as DMO holds Auction

Nonetheless, Chapel Hill Denham analysts said they do not expect a sizeable upward repricing of yields in the near term, given that the liquidity backdrop is still supportive.

An NTB auction is scheduled to hold on Wednesday where the Debt Management Office (DMO) is set to offer ₦113.97 billion.

The Treasury Bills auction will cut across three tenors (91-day, 182-day and 364-day) to partly rollover maturing bills worth ₦134 billion.

Analysts recalled that the previous auction cleared at 1.09%, 1.50% and 3.05% respectively.

We expect a well bid auction, given the liquidity glut in the money market“, Chapel Hill Denham stated.

Interbank Rates Ease Further on High Liquidity as DMO holds Auction

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