Rates seen trending further south as N216bn OMO maturities hit system   

This week, rates at the money market would trend southwards as OMO maturities worth N216.0bn are expected to hit the system only if the CBN do not continue with its liquidity mop-up via OMO sales.

Analysts say money market rates would at the worst trade trade within a similar band as last week’s.

Money market rates, open buy back (OBB) and overnight (ON), trended lower w-o-w on the back of changes in system liquidity following OMO repayments/sales and primary market auctions in the system.

Despite a reduction in system liquidity which fell N55.7 billion to N331.3 billion (from N387.0bn in the previous session) following an OMO auction of N37.1 billion, OBB and ON rates trended southwards on the opening trading day of the week – down 13.5ppts and 15.3ppts to 3.7 percent and 4.4 percent respectively from 17.2 percent and 19.7 percent in the prior week. By midweek, the OBB and OVN rates further fell 1.9ppts apiece to 1.8 percent and 2.5 percent respectively even as system liquidity contracted to N290.5 billion.

On Thursday, system liquidity surged to N1.2 trillion following OMO and T-bills repayments worth N529.1bn, which offset the impact of primary market sale of N49.6 billion on the day; OBB and Overnight rates increased 1.1ppts and 1.2ppts to settle at 2.8 percent and 3.7 percent respectively.

The CBN also issued OMO securities on Thursday, with the 112-day instrument (Offered: N150.0bn, Sale: N328.7m) and 231-day instrument (Offered: N650.0bn, Sale: N560.9bn) issued at rates of 11.1 percent and 12.2 percent respectively.

Similarly, on Friday, another OMO auction was carried out with the 111-day instrument (Offered: N50.0bn, Sale: N9.3bn) issued at a rate of 11.1 percent. Hence OBB and ON closed the week at 3.3 percent and 4.4 percent, down 13.8ppts and 15.3ppts w-o-w respectively.

Performance of the treasury bills market was mixed as average rate across tenors traded higher on two of four trading sessions in the week. The week opened on a bullish note as average rate across benchmark tenors fell 34bps to 12.4 percent from 12.7 percent in the preceding trading session.

Conversely, by midweek, average rates rose by 9bps to 12.5 percent following the Primary Market Auction carried out by the Apex Bank. The 91-day (Offered: N5.0bn, Subscription: N5.2bn, Allotted: N5.0bn), 182-day (Offered: N24.8bn, Subscription: N34.9bn, Allotted: N24.8bn) and 364-day (Offered: N19.8bn, Subscription: N63.0bn, Allotted: N19.8bn) treasury bills instruments were allotted at stop rates of 10.0 percent, 10.3 percent and 11.0 percent respectively.

Average rates across benchmark tenors on Thursday further trended higher, up 18bps to 12.6 percent before settling at 12.5 percent on Friday down 21bps w-o-w.