Short-Term Funding Rates Ease as Liquidity Hits N7.4trn
Money market short-term funding rates ease on one side amid a bloated liquidity balance in the financial system. The overnight lending rate declined 3 basis points, but the repo rate remained unchanged at 22%.
The surplus funding profile kept rate movements in check amidst Apex Bank open market operations on Tuesday. The authority was more aggressive with OMO bills allotment made on Tuesday.
Market liquidity opened the day at a credit balance of N7.35 trillion, representing a N3.02 trillion increase from Monday’s closing level of N4.33 trillion, Herwood Securities Limited disclosed in a report.
Reflecting the surplus position, Deposit Money Banks (DMBs) maintained heavy placements in the Central Bank of Nigeria (CBN) standing deposit facility (SDF) with little recourse to the borrowing window.
The market anticipates that the surplus balance in the financial system will shrink following the OMO bill auction floated on Tuesday, with a total allotment of about N4.4 trillion. The Central Bank is also scheduled to auction Treasury bills with an offer size of N500 billion on Wednesday.
These auction settlements are anticipated to reduce excess liquidity in the money market. However, the market is also expecting N3 trillion in OMO repayments.
The Open Repo Rate (OPR) remained unchanged at 22.00%, while the overnight rate declined by 3bps to close at 22.15%.
The money market is expected to remain stable, with liquidity conditions still supportive despite the sizeable OMO allotment, Herwood Securities Limited said in its note.
Market analysts said short-term funding rates are likely to remain broadly unchanged, as the system is expected to retain sufficient liquidity to meet near-term funding needs.
Overall, market conditions should remain comfortable, with limited pressure on funding rates, the investment firm said. #Short-Term Funding Rates Ease as Liquidity Hits N7.4trn

