Money Market Rates Rise as Auction Settlement Drags Liquidity

Money Market Rates Rise as Auction Settlement Drags Liquidity

Money market rates rose apiece as outflows relating to the Treasury auction sales by the Central Bank of Nigeria (CBN) on Wednesday dragged the liquidity balance in the financial system downward. 

MarketForces Africa gathered that the surplus balance in the financial system, which printed at about N804 billion on Wednesday declined to about N627 billion at the end of trading session on Thursday.

In a note, a slew of market analysts acknowledged that the short-term benchmark interest rates reacted negatively to liquidity slowed down in the money market. 

Investment banking firm Cowry Asset Limited said in a note that the Nigerian Interbank Offered Rate (NIBOR) increased across most maturities.

Analysts noted that on the contrary, the overnight NIBOR, which saw a decline, signaling adequate liquidity within the banking system despite recent outflows.

System liquidity remained strong but experienced a slight decline due to the settlement of the Nigerian Treasury bills auction—a net debit of N173.44 billion, AIICO Capital Limited said.

Data from the FMDQ platform revealed that interbank rates increased, with the overnight policy rate (OPR) rising by 50 bps to 26.86% and the overnight rate (O/N) climbing by 75 bps to 27.46%.

On Thursday, the net impact of the Treasury bills auction settlement worth N173.44 billion depleted the liquidity in the banking system by 22%, TrustBanc Financial Group said in its market update. 

The outflow brought the opening balance to a surplus of N626.50 billion, from N803.7 billion in the previous day.

“Given the current system liquidity balance, we expect funding rates to hover around prevailing levels,” TrustBanc said. #Money Market Rates Rise as Auction Settlement Drags Liquidity Paul Atkins: Global Crypto Market Cap Hits $3.71T as BTC Rally