Interbank Rates Slide as Financial System Liquidity Improves

Interbank Rates Slide as Financial System Liquidity Improves

Interbank rates slide as financial system liquidity position improves amidst expectation of an inflow from open market operations (OMO) on Tuesday.

Recently, money market has been faced with liquidity squeeze due to lower inflow while banks built camp around the Central Bank’s Standing Lending Facility for funding requirement.

According to Chapel Hill Denham, the financial system liquidity opened slightly higher at N75.53 billion from N25.10 billion on Friday while the pass-through impact of this drove a slight moderation in funding rates.

Precisely, the overnight lending and open buy back (OBB) rates dipped by 25 basis points apiece to 18.50% and 19.00%, respectively.

Tomorrow, an open market operations maturity of N15 billion is expected to hit the system, the impact of which should support further rate moderation, Chapel Hill Denham’s analysts stated.

Meanwhile, the fixed income space remains cold since the Central Bank decision to hold policy rates douse investors’ appetite for securities amidst high inflation rate.

Analysts at Chapel Hill Denham said in a report that akin to last week, activities in the front end of the yield curve was mostly quiet on Monday. This resulted in the Nigerian Treasury Bill and OMO benchmark curve closing flat at 6.14% and 9.24%, respectively.

Elsewhere, in the bond segment, the market traded bullish, driven mostly by investors’ preference for the mid and long day to maturity (DTMs) instruments.

Precisely, yields compressed by as much as 8 basis points on average across the benchmark curve to close at 12.78%, driven mostly by the interest in the mid DTMs (-8bps to 12.71%) and long (+13bps to 13.27%) tenured instruments.  The short end of the curve closed flat at 12.01%.

“All eyes will be on the bond auction scheduled to hold on Wednesday, June 23. The Debt Management Office (DMO) is expected to offer up to N180 billion across three maturities, split evenly between the MAR 2027, MAR 2035, and Mar 2050 reopening”.

The last auction cleared at 12.93%, 13.80%, and 14.00%, respectively. Odds are in favour of higher marginal rates at the upcoming auction.

In the currency market, Naira depreciated by 16 basis points or 67 kobo in the Investors and Exporters market and depreciated by 40 basis points or 2 Naira in the parallel market.

Interbank Rates Slide as Financial System Liquidity Improves