Softer system liquidity anticipated amidst CBN multiple OMO sales

The CBN has found it most important to conduct multiple OMO sales to combat higher system liquidity, and so far this year, the system liquidity has been very tight, but this week, Nkechi Ezugho, forex trader at UBA is of the opinion that the FAAC payment and OMO maturities could mean a softer system liquidity.

Nkechi Ezugho said, “in the new week, we expect liquidity to loosen up a bit in the expectation that FAAC may come in this week, and an OMO maturity of about N381 billion, that will inject more capital into the system, however, the CBN will continue with its tightening stance, so we expect 1 or 2 OMO sales in the new week”

“The yield curve is expected to trade in the same range, in the OMO sales that we’ve seen so far, the results have shown that all the rates were maintained, whereas in the NTB last week, we noticed that there were some short tenored maturity and rates went up a bit from 10.98 percent to 11 percent, while in the long end it inched up 50 basis points from 14.5 percent to 15 percent, matching what we have in the OMO issuance, so we expect the rates to be relatively stable,” Ezugho added.

Speaking on events at the market last week, she said, “at the start of the week the market was bearish, but due to the treasury bill maturity of about N780 billion, we saw a bullish trend prevail, and since it is the beginning of the year, investors are taking positions, selling short term and buying to build position and we expect this to continue into the new week.”

“The system liquidity was very tight last week, we’ve seen CBN mopping regularly in the wake of any maturity, and traders continue to sell to create liquidity, that was why we saw a lot of activities in the short and medium end of the secondary market, but in the primary market, focus is on the long tenored bills, we’ve seen a lot of player buying long tenured bills in the wake of foreign investment inflows,” she said.