Market Temperature Rises as CBN Floats OMO Auction Again
Godwin Emefiele - Governor, Central Bank of Nigeria

Market Temperature Rises as CBN Floats OMO Auction Again

The money market records retail foreign exchange auction pressure on funding as the apex bank floated open market operations (OMO) auction Thursday first time in the last two month.

As investors scramble for strong return,  the financial system liquidity open higher at ₦510 billion from ₦235 billion yesterday.

However, funding pressures increased, due to provisioning for the retail FX auction, says Chapel Hill Denham.

Consequently, the Open Buy Back and Overnight rates spiked by 14.60% and 16.01% to 17.60% and 19.80%, respectively.

Market Temperature Rises as CBN Floats OMO Auction Again
Godwin Emefiele – Governor, Central Bank of Nigeria

Analysts remarked that sentiments remained mildly bullish in the fixed income market Friday as discount rates on benchmark Nigerian Treasury Bills and OMO bills compressed by 2bps and 4bps to 1.89% and 3.85%, respectively.

In the bond market, yields further compressed by 2bps to 7.71% driven by interests at the long end of the curve (-2bps to 7.71%).

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Analysts at Chapel Hill expressed that the Central Bank of Nigeria floated an OMO auction for the first time in nearly two months.

The CBN offered ₦50 billion  but subscription was strong at ₦94.4 billion  with bid-cover ratio of 1.9x.

Meanwhile the Bank sold  ₦45.4 billion : ₦5.6 billion  of 103-day, ₦9.8 billion  of 173-day, and  ₦30 billion  of 362-day bills.

So, stop rates compressed an averaged of 4bps to 7.2%, as the 103-day tenor cleared lower at 4.92% (-3bps), 173-day at 7.74% (-5bps), and 362-day at 8.94% (-5bps).

“Next week, investors’ attention will likely remain focused on the bond Primary Market Auction (PMA) holding on Wednesday, where the DMO is scheduled to offer N150 billion”, Chapel Hill Denham stated.

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The firm explained that given the large upcoming OMO maturity next week (₦181.4 billion), odds are in favour of another well-bid PMA.

“As a result, we expect bullish sentiments to continue to prevail in the secondary market”, analysts stated.

In the foreign exchange market, Naira weakened against the USD in the Investors and Exporters Window (IEW) by 0.04% or 17 kobo to ₦386.00, while the parallel market remained flat at ₦475.

Similarly, the official and Secondary Market Intervention Sales pegs were unchanged at ₦381 and ₦380.69 respectively.

The external reserves stood at US$35.6 billion, having dropped 0.7% month to date as at 13 August 2020.

Market Temperature Rises as CBN Floats OMO Auction Again