Interbank Rates Stable as Banks’ Placements with CBN Climb
Interbank rates steadied as the money market maintained an excess liquidity profile that kept tightening funding costs. Amidst weak lending appetite and lower yields on Treasury bills, banks have stepped up activities at the standing deposit facility of the Central Bank to boost their earnings.
To Nigerian lenders, it costs money to keep money in low yields asset and 24.5% rate at the CBN standing deposit facility has become alternative private sector’s lending with attendant default risks.
The market remained relatively flooded with excess funds, settling at ₦3.1 trillion, reflecting an increase of ₦587.0 billion from the previous level, the investment firm said in separate reports.
The improvement was mainly driven by an increase in balances at the CBN’s SDF window to ₦2.9 trillion despite the SLF window recording ₦30.2 billion, AIICO Capital Limited said in a report.
Last week, system liquidity opened the week at N3.12 trillion, peaking at N4.81 trillion mid-week, buoyed by FAAC inflows, before moderating by N648.47 billion week on week to N2.47 trillion, Coronation Merchant Bank Limited said in an update.
This reflected the combined effect of the FGN Bond and OMO auctions, which collectively mopped up N672.96 billion last week, merchant lenders said in an update.
On Monday, Nigerian interbank rates held steady, with the overnight rate unchanged at 24.88%, indicative of stable system liquidity conditions and subdued interbank borrowing activity.
Commercial banks continued parking excess funds in the CBN’s Standing Deposit Facility (SDF), which accumulated ₦14.30 billion over the prior week, Cowry Asset Limited stated in a note.
However, medium-term tenors exhibited upward pressure, rising 8bps, 17bps, and 25bps respectively, the investment firm added.
Money market funding rates remained flat, with both the overnight lending rate and Open Purchase Rate anchored at 24.86% and 24.50% respectively.
Market analysts anticipate funding cost to remain at similar level, barring any funding activity or significant OMO action by the Central Bank.
In the Treasury Bills secondary market, yield movements were mixed on Monday as investors’ sentiment remained subdued atthe belly and long end of the curve.
Short- to medium-term benchmarks: 1-month, 3-month, and 6-month expanded by 19 bps, 17 bps, and 19 bps, respectively, while the 12-month tenor compressed 9 bps.
Notably, the composite Treasury Bills average yield edged down 1bp to 17.45%, reflecting resilient investor appetite and sustained bullish positioning in the fixed-income segment.
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