Money Market Rates Rise as Liquidity Balance Slumps
Reflecting liquidity tightening, money market rates increased strongly on Thursday as funding levels were significantly reduced. Market analysts observed that liquidity pressure has started to return, lifting rates higher to balance demand and supply sides.
Due to the absence of significant fund inflows into the financial system, interbank rates saw a huge increase, crossing the 30% benchmark straight ahead. Investment analysts at AIICO Capital Limited said in a market update that system liquidity decreased by about 36.94% compared to yesterday’s balance.
Analysts had predicted short term benchmark interest rates in the money market would jerk up in the week once the inflows from maturing instruments receded,d, in addition to reduced FAAC credit effects on liqudity level.
As a result, interbank rates were seen making an uptrend, reversing the previous trend experienced in the money market. Data from the FMDQ platform showed that, the Open Repo Rate (OPR) increased by 557 basis points to 30.97% on Thursday, amidst expectations that the funding system will close the week on a negative note.
Also, the overnight lending rate increased by 587 basis points to 31.72%, traders said, citing data from the FMDQ. “We expect system liquidity to open lower tomorrow, while interbank rates remain elevated,”, AIICO Capital Limited said in a note.
The movement in money market rates affects returns on short term investment fund pools, analysts said. In the market, cash rich local deposit money banks were seen requesting higher rates on their free cash.
The opening market liquidity was reported at N655.5 billion on Friday. Call, overnight, and repo rates closed within the range of 8%–26%, as rates in the money market moderated. #Money Market Rates Rise as Liquidity Balance Slumps Liquidity: Banks Drive Yield Surge with T-Bills Selloffs
