Overnight Lending Rate Declines, Excess Liquidity Shrinks
Money market rates moved in different directions as huge outflows relating to the Apex Bank auction sales failed to exert significant pressures.
FMDQ data showed that the overnight lending rate declined as excess liquidity in the banking system shrank following huge OMO bill settlements.
Despite the outflow, the financial system remained strong as banks remained active at the Standing Deposit Facility (SDF), reflecting absence of significant funding pressures.
The market anticipates midweek auction to reduce excess liquidity level. The Central Bank is expected to float N700 billion Treasury bills across standard tenors.
The auction has potential to be oversubscribed, and this expected to impact liquidity level in the financial system as analysts anticipate that banks will step up investment in short term securities to boost earnings.
The market liquidity opened the day with a surplus balance of ₦3.9 trillion, reflecting a significant decrease of ₦2.3 trillion from the previous level. The funding profile had crossed N6 trillion, supported by growing SDF placement by cash-rich banks.
Boosting excess cash in the financial system, the market recorded a ₦254.8 billion bond coupon inflow. Money market funding costs were mixed as the overnight lending rate declined 6 bps to 24.86%, while the Open Purchase Rate remained unchanged.
In the Treasury Bills secondary market, yields exhibited divergent trends. Despite these varied movements, the Treasury Bills average yield fell 2 bps to 16.96%, signalling robust investor demand and favourable sentiment in the fixed-income segment. Naira Tumbles over Shrinking US Dollar Supply in FX Market
