Money Market Rates Closed Strong despite Elevated System Liquidity

Money Market Rates Closed Strong despite Elevated System Liquidity

In the money market, rates closed strong on Friday despite elevated financial system liquidity in the financial system.

Market data indicates that interbank rates trended lower on 2 of 5 trading days due to improved system liquidity.

At the start of the week, Open Buy Back (OBB) and Overnight (OVN) rates closed at 0.5% and 0.8% respectively, from 0.5% and 1.0% recorded on the previous Friday as system liquidity declined to ₦374.6 billion.

On Tuesday, rates trended lower as system liquidity increased to ₦732.8 billion supported by ₦226.3 billion inflows from OMO maturities.

Hence, OBB and OVN rates closed at 0.4% and 0.5% respectively.

Meanwhile on Friday, OBB and OVN rates surged to 10.0% and 10.5% respectively despite robust system liquidity at ₦704.3bn.

Following the inflow from OMO maturities worth ₦226.3 billion, on Thursday, the Central Bank of Nigeria, CBN, conducted OMO auction worth ₦170.0bn to mop-up excess liquidity in the system.

Demand at the auction was healthy as the 103-day total offer was ₦20.0 billion and investors subscribed for ₦51.1 billion while ₦20.0 billion was allotted.

Also, 180-day offer came at ₦20.0 billion with total subscription at ₦79.8 billion but sale closed at ₦20.0 billion.

As well, 362-day offer was ₦130.0 billion while subscription came at ₦569.4 billion and sale was just ₦130.0 billion.

Across tenors, instruments were oversubscribed by 2.6x, 4.0x and 4.4x with marginal rates of 1.5%, 4.3% and 5.7% respectively.

Read Also: Market Wrap: Domestic Bond Market Remains Downbeat

In the treasury bills secondary market, the performance was mixed albeit negatively skewed as average yield across benchmark tenors trended higher on 3 of 5 trading days.

The week started on a bullish note as average yield across tenors settled at 0.4%, down 14bps from 0.6% recorded the previous Friday.

On Tuesday and Wednesday, sentiment was bearish as average yield rose 1bp and 15bps respectively. Following that, average yield fell 5bps on Thursday and rose 9bps on Friday.

Consequently, the average yield across the market increased 6bps w/w to settle at 0.6%.

“In the coming week, we expect the CBN to sustain its OMO auction given that OMO maturities worth ₦190.2bn will impact system liquidity levels.

“Also, we envisage the elevated system liquidity levels would continue to drive rates lower at the secondary T-Bills market”, Afrinvest said.

Money Market Rates Closed Strong despite Elevated System Liquidity