Surplus Liquidity: Repo, Overnight Rates Hover Around 27%

Surplus Liquidity: Repo, Overnight Rates Hover Around 27%

Surplus liquidity in the banking system keep short term benchmark interest rates hovering below 27%, and analysts expect the trend to persist in the absence of significant pressure.

The money market rates: overnight and repo rates stayed below 27% apiece on the back of liquidity surplus in the banking system.  Rates directions were mixed, according to data obtained from FMDQ platform, after a slight decline in financial system liquidity on Monday. 

System liquidity closed the day at N1.397 trillion, down by N4.66 billion from N1.402 billion last week. Market analysts reported that the interbank market saw limited activity with no major funding flows, keeping overall rates relatively flattish.

However, the open repo rate (OPR) fell 7bps to 26.43%, while the overnight (O/N) rate declined 6bps to 26.89%. Investment Firm anticipate rates will stay at the current level unless major funding pressures emerge.

The financial system liquidity improved significantly over the week, buoyed by FAAC disbursements of ₦1.1 trillion, FGN bond coupon payments of ₦113.62 billion, and OMO maturities, offset partially by TSA debits, net OMO settlements, and bond auction outflows.

Despite frequent CBN liquidity management interventions through OMO auctions totalling over ₦1.19 trillion, market liquidity strengthened from ₦739.10 billion to ₦1.40 trillion on Friday.

Funding rates remained anchored at 26.5% throughout last week.  The Overnight Policy Rate (OPR) fell 2.40% w/w to close at 26.50%, while the overnight rate declined 2.20% w/w to 26.95%.

The market anticipates OMO maturities inflows totalling ₦459.60 billion to boots the financial system liquidity this week, despite the expected Treasury bills auction. On Wednesday In the T-bills secondary market, trading was largely with a bearish bias, as the average yield across the curve rose 23bps week on week to 22.18%.

The uptick was driven by Nigerian Treasury Bills (NTBs), where average yields expanded by 50bps w/w to 18.88% p.a. In contrast, OMO bills recorded a marginal decline, with average yields easing by 3bps to 25.49% p.a. #Surplus Liquidity: Repo, Overnight Rates Hover Around 27% FGN Bond Auction: Robust Demand, Rising Yields Signal Strategic Shift Toward Fixed Income