Strong System Liquidity Keeps Interbank Rates at Low Single Digit

Strong System Liquidity Keeps Interbank Rates at Low Single Digit

Interbank rates was stuck at low single digits yesterday in the money market due to buoyant system liquidity.

The financial system liquidity had opened slightly higher at N335 billion when compare to  N334.9 billion in the previous day.

The Overnight (OVN) rate eased slightly by 17 basis points (bps) to 1.58%, while the Open Buy Back (OBB) rate was flat at 1.00%.Strong System Liquidity Keeps Interbank Rates at Low Single Digit

Chapel Hill Denham however expects funding pressures to remain benign next week, with a large Open Market Operations (OMO) maturity expected on Thursday (N567.69bn).

The fixed income market traded largely flattish, as the investors remain cautious despite buoyant liquidity.

At the front end of the curve, analysts said the Nigerian Treasury Bills (NTBs) benchmark curve was unchanged at an average of 1.92%.

However, the OMO benchmark curve expanded by 4bps to 2.11%, due to upward repricing of mid- day to maturity (+15bps to 2.54%).

In the bond market, yields declined marginally by an average of 1bp on the benchmark curve to 6.51%.

The decline was due to short duration positioning which pulled short (-2bps to 3.40%) and intermediate (-1bp to 7.06%) slightly lower, while long term bonds closed flat at an average of 8.92%.

Chapel Hill Denham insists that the renewed apathy for duration suggests investors may already be positioning for the peak of the bond rally.

Nonetheless, analysts said they do not expect a sizeable upward repricing of yields in the near term, given that the liquidity backdrop is still supportive.

The market will be looking forward to the presentation of the 2020 Budget next week, which should provide a guide on the deficit financing plans of the government.

A relatively lower (compared to revised 2020 budget) domestic budget financing plan may be interpreted as bullish, analysts stated.

Read Also: Interbank Funding Eased on Strong Financial System Liquidity

Strong System Liquidity Keeps Interbank Rates at Low Single Digit

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