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N490.4bn inflow to lift interbank liquidity

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*As bond investors position ahead of N191.7bn maturity

By Nkiruka Nnorom

The interbank money market will enjoy liquidity boost of N490.4 billion from matured treasury bills (T-bills) this week, even as the naira weakened last week depreciated despite foreign exchange (FX)  sales resumption.

Activity in the bonds market would also be bullish as investors reinvest inflows from bond coupon. 

Meanwhile, the nation’s external reserves balance declined 1.3 percent week-on-week (w/w) to $35.2 billion following the 9.5 percent fall in crude oil prices last week. 

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Last week, Open Buy Back (OBB) and  Overnight Lending (OVN) rates opened the week at 1.4 percent and 2.3 percent respectively from last week’s close of 1.6 percent and 2.3 percent  as system liquidity fell to N737.7 billion.  

On Wednesday, OBB and OVN rates rose to 1.5 percent and 2.4 percent respectively as system liquidity decreased to N480.9 billion . 

By the close of the week, OBB and OVN rates surged to 14.5 percent and 16.5 percent respectively as system liquidity settled at N632.0 billion. 

Vanguard’s checks revealed that activity in the bonds market was also bullish last week following buying interest on all trading days. 

The bullish sentiment was driven by demand from investors seeking to take position ahead of the bond coupon payment amounting to N191.7 billion. 

The short-term instrument recorded the most buying interest as average yield declined 1.2% week-on-week (w/w). 

Analysts at Afrinvest Securities have said that the trend would continue this week following an inflow of N490.4 billion from maturing OMO auctions. 

They said: “In line with its schedule, the Central Bank of Nigeria (CBN) conducted T-bills sales worth N128.1 billion on Wednesday, N20 million lower than same day’s maturity. Demand was strong across broad with bid-to-cover ratio of 2.0x, 1.6x and 2.1x for the 91, 182 and 364-day instruments respectively. 

“On Thursday, the CBN auctioned OMO instruments worth N70.0 billion, lower than same day’s maturity of N247.4 billion. Demand was strong as the 75-day,180-day and 355-day offers of N10 billion, N10 billion and N50 billion were oversubscribed at 1.2x, 3.5x and 4.3x with marginal rates of 4.9 percent, 7.7 percent and 8.9 percent respectively.“”In the secondary T-bills market, there was a bullish outing as average rate declined 17bps w/w to 1.8 percent. Investors sold-off the 91- day instrument resulting in rates advancing 38 basis points (bps), while the 182 and 364-day instruments saw high demand as the yields dropped 30bps and 59bps respectively. 

“We expect a robust system liquidity following OMO maturities worth N348.3 billion and N142.1 billion from bond coupon payment. Accordingly, we expect rates to trend lower.

“We also expect to see a bullish performance in the domestic bond market as investors reinvest inflows from bond coupon.”

They, however,  stated that rates in the foreign exchange (FX)  market would be range-bound across different segments in the market.

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