OVN rises by 250bps as OMO depletes liquidity levels

The overnight lending rate increased by 250 basis points to 7 percent, as liquidity levels in the market declined following the PMA and OMO auctions held Wednesday and Thursday respectively.

At the OMO auction, the Central bank offered a total of N107 billion, and saw a 22.06 percent oversubscription to the tune of N473.5 billion, as stop rate across all tenors dropped.

Activities in the Treasury bills market were bearish as the average yield increased by 10 basis points to 10.85 percent. Sell-offs on the 140DTM instrument led to yield expansion at the mid-segment of the curve while yields on the short and long end of the curve traded flat.

Speaking on the activities in the fixed income and money market space, Oluwajire Otayomi, forex trader at Access bank stated that of late, the CBN has held off OMO and the system awash with liquidity, however, the OMO auction today, helped the CBN reduce liquidity thus the increase in OVN.

Otayomi said, “For a while now, traders have been expecting OMO, so there was a lot of liquidity in the system but today’s OMO helped with that, that is why the OVN was able to increase by 250 basis points.”

Activities in the bond market were tempered today, as the average yield widened marginally by 1 basis point to close at 13.71 percent. Sell-offs on the FEB-2028 bond and JUL-2034 instruments led to yield expansions at the mid and long segments respectively.

In today’s trading, the naira depreciated by 0.003 percent against the US dollar to N361.62 per dollar at the I&E FX window but was flat at N360 to the dollar at the parallel market.