Money Market Rates Steady on 39% Liquidity Surge in Banking System
The money market rates remained steady despite more than a 39% increase in banking system liquidity, amid the ongoing Monetary Policy Committee meeting scheduled to end on Tuesday.
The strong liquidity condition in the financial system kept short-term benchmark interest rate pricing in check following a slowdown in interbank activities.
Deposit Money Banks (DMBs) placements at the Central Bank of Nigeria (CBN) standing deposit facility (SDF) were minimal compared with recent past events supported by OMO repayments.
Suffice it to say that Apex Bank’s aggressive liquidity management has cooled off amid ongoing policy committee meetings, though the market anticipates significant open market operations to reduce excess funding levels.
System liquidity rose a further 39.62% to ₦3.99 trillion from ₦2.86 trillion, a second straight build, AIICO Capital Limited said in its market update obtained by MarketForces Africa.
The investment firm said that the ₦3.81 trillion the central bank repaid into the system on 15-16 September is still being worked through, and with no FAAC allocation and no OMO auction on the day, there was nothing to absorb it.
Hence, funding costs did not move: the policy rate and the Nigerian Overnight Financing Rate both held at 22.00% and the overnight rate at 22.24%, while the average Treasury bill rate eased 0.03 percentage points to 18.82%
“We expect short-term rates to stay anchored at the 22.00% policy corridor. At ₦3.99 trillion, the buffer is now large enough that the central bank’s next OMO auction becomes the main question for the week; until it prices, funding should stay cheap and the bill curve capped”, AIICO told investors in an update released.
In the secondary market, the average yield on Nigerian Treasury bills declined ahead of the midweek primary market auction, where the CBN is scheduled to open N500 billion for subscription.
Market analysts said heightened trading activity and robust investor appetite drove overall bullish market sentiment, pulling the average T-Bill yield down by 3 bps to 18.82%. Nigeria Raises 10-Year Bond at 16.79%
