Rates to moderate on anticipated boost in financial system liquidity

March 23, 2020
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In the new week, treasury bills worth N76.22 billion will mature via Open Market Operation (OMO); hence it is expected that interbank rates will moderate amid anticipated boost in financial system liquidity.

Dealers said foreign investors stayed away from the Central Bank’s latest OMO Auction which held on the 19th of March 2020. Available data show there were zero bids for each of the OMO bills slated for sale by the CBN.

According to Zedcrest capital, a dealer, the Treasury Bills market ended the week on a slightly active note, as “we saw segmented activity on OMO maturities. The short-end of the curve had the most demand pressure, as banks looked to the short-end to properly manage excess liquidity from yesterday’s OMO maturities.

NIGERIAN TRIBUNE

“The long-end of the OMO curve (January-March 2021) was saturated with offers from offshore investors, but no bids to match, as banks were reluctant to reinvest at the long-end of the OMO curve.”

The Central Bank had about N140 billion on offer via the restricted Open Market Operations divided into N10 billion for 89-day and 180-day bills respectively and another N130 billion for a 362-day bill. The 362-day bill was offered at a range of bid of between 17 per cent and 18.25 per cent.

The CBN has over the last two years relied on selling OMO Bills to foreign and local portfolio investors at very high rates using it as a pseudo sterilizer of the naira and attracting the much needed foreign currency brought into the country by foreign portfolio investors. Since then OMO Bills have ballooned to an N18 trillion market until the CBN said it has had enough late 2019.

Similarly, Bonds traded mixed on Thursday as gains on the short and long ends of the curve offset the losses on the mid-end. Bid-ask spreads on 10-yr and 30-yr bonds have narrowed by about 12 basis points (bps), indicating improved trading liquidity.

According to dealers, value traded so far is N6.3 billion, with most flows on the 2023 and 2029 bonds.

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