Money Market Rates Mixed as Liquidity Drops by 39%

Money Market Rates Mixed as Liquidity Drops by 39%

Money market rates showed mixed performance as liquidity in the financial system decreased by over 39% due to deposit money banks reducing their placements at the Central Bank’s Standing Deposit Facility.

The short-term benchmark interest rates showed varied trends on liquidity drop, while some market analysts anticipate an open-market operation by the authorities to tighten liquidity.

System liquidity declined by 39.28% to N3.56 trillion, primarily due to a 35.91% reduction in the Standing Deposit Facility balance, which fell to N3.46 trillion. This came in addition to a 41.28% reduction in banks’ opening balances with the CBN.

Previously, money market liquidity had peaked at approximately N6 trillion before the latest round of Open Market Operations (OMO) bills were settled.

In response to tightening conditions, money market rates eased, with the overnight lending rate decreasing by 10 basis points to 22.14%, while the Open Repo rate remained steady at 22.00%.

The Nigerian Interbank Offered Rates (NIBOR) closed mixed on Monday, with the overnight rate dropping by 1 basis point to 22.29%, indicating improved system liquidity.

According to investment firm Cowry Asset Limited, the 1-month, 3-month, and 6-month tenors moved in opposing directions; however, they recorded increases of 24 basis points, 62 basis points, and 182 basis points, respectively.

In the Treasury Bills secondary market, yields were similarly diverse, with the 1-month, 3-month, and 6-month bills rising by 19, 32, and 13 basis points, respectively.

Conversely, the 12-month tenor declined by 3 basis points. Overall, the average T-Bills yield decreased by 2 basis points to 17.48%, reflecting increased investor demand and a generally positive sentiment across the fixed-income market.Global Equity Markets Struggle, S&P 500, Nasdaq Decline