Analysts expect higher rates in money market instruments this week
Reporter
Analysts at Afrinvest (West Africa) Ltd., a research and independent investment banking firm, are expecting money market rates to trend slightly higher in this week.
The analysts in their preview for last week expect the increase in the money market rate on the back of expected OMO mop-ups and the planned Wednesday DMO bond auction of N100.0 billion notwithstanding Thursday OMO maturity of N37.9 billion.
A review of last week indicates that money market rates trended downwards throughout the week in line with system liquidity despite the OMO (Open Market operations) mop-up, Wholesale FX Secondary Market Intervention Sales (SMIS) and the T-bills primary market auctions by the Central Bank of Nigeria (CBN).
The activities of the CBN in the past weeks clearly showed its commitment to stabilize the financial system, keep liquidity levels in check while also sustaining the recent gains in price and exchange rate stability.
Open-buy-back (OBB) and overnight (OVN) rates trended lower to 18.0 percent and 20.0 percent on Monday from last week’s close of 43.3 percent and 45.5 percent respectively despite lower system liquidity of N35.5 billion (from Friday’s level of N46.4 billion) and FX sales of US$100.0 million at the SMIS window.
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On Tuesday, rates continued on a descent as OBB and OVN settled at 14.3 percent and 15.3 percent, following a no-sale of OMO securities by the CBN, which improved system liquidity. OBB and OVN continued its steady decline on Wednesday settling at 8.7 percent and 9.0 percent as the total T-bills issuance of N176.0 billion dwarfed the improved system liquidity, which opened at N260.7 billion.
By Thursday, the CBN mopped up N50.7 billion from the system but the effect on system liquidity was negligible following the N90.0 billion OMO inflow on the same day which took system liquidity to N492.3 billion. As a result, OBB and OVN fell further to 6.7 percent and 6.9 percent respectively.
On Friday, OBB and OVN closed the week at 6.7 percent and 6.9 percent indicating 36.6 points and 38.6 percent points decrease week on week respectively