Interbank Rates Remain Subdued despite Liquidity Drop
Interbank money market rates remained subdued at sub-1%, even as financial system liquidity opened lower.
On Friday, liquidity opened at ₦230 billion from ₦40 5billion in the previous session.
This was partly due to ₦70 billion open market operations (OMO) sale by the apex bank on Thursday.
Consequently, the Open Buy Bank rate rose marginally by 7 basis points (bps) to 0.50%.
Meanwhile the Overnight (OVN) rate eased by 12bps to 0.63%.
“We expect funding pressures to remain subdued for the most part of next week”, Chapel Hill Denham noted.
The firm’s position is partly supported by OMO maturities totaling ₦281 billion on Tuesday.
However, analysts note that rates are expected to shoot up next Friday, due to provisioning for the bi-weekly retail FX auction by the CBN.
Sentiments remained mixed in the fixed income market as short term rates traded upbeat while bonds remained weak.
At the front end of the curve, discount rate on benchmark NTBs compressed by an average of 38bps to 0.10%.
Meanwhile the OMO curve eased slightly by 1bp to 0.22%.
Also, the bond market witnessed selective positioning in some short and intermediate bonds.
Nonetheless, the benchmark curve inched higher by an average of 5bps to 4.28%.
Chapel Hill Denham said the reaction to the bullish Nigerian Treasury Bill auction which held mid-week has so far been modest in the bond market.
It would appear that traders are waiting for the bond auction holding next week to gauge the Debt Management Office (DMO) aggression before taking a directional view of the market, analysts reckoned.
Based on the bond auction circular published yesterday, the DMO plans to raise up to ₦80 billion.
This was split equally at ₦40 billion between the 15-year MAR 2035 reopening and 25Y JUL 2045 reopening.
The previous auction cleared at 4.97% and 6.00% respectively.
“We expect the auction next week to clear at lower yields, given the supportive liquidity backdrop”, Chapel Hill Denham stated.
In the currency market, the exchange rate continued to trade within a tight band at the regulated segments of the FX market, while pressures persisted in the parallel market.
The local currency weakened marginally against the US dollar by 9bps or 33 kobo to ₦386.00 in the I&E Window, but closed flat at 379.00 in the official window.
However, the naira weakened more substantially by 0.64% or ₦3.00 to ₦470.00.
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Interbank Rates Remain Subdue despite Liquidity Drop
