In the just concluded week, treasury bills worth N10 billion matured via the Open Market Operation (OMO) amid the absence of refinancing from the Apex bank.
The financial system liquidity ease appears to have been induced by the rise in lending facility received by deposit money banks from the apex bank to shore up their short-term liquidity needs – given the pressure from Bond issuances.
We observed that banks went for Repo transactions (N287.51 billion) to shore up financial liquidity even as they also
queued to borrow from CBN (standing lending
facility – N13.93 billion) more than they
deposited (standing deposit facility- N779.6 million).
Given the liquidity from borrowings and Repo,
NIBOR for most tenor buckets crashed: 1 month, 3 months and 6 months fell to 10.81% (from 12.72%), 11.82% (from 11.90%) and 11.11% (from 11.16%) respectively.
However, the overnight rate rose to 14.73% (from 14.07%) – an indication of worsening liquidity in the banking institutions.
The Treasury Bills primary market was quiet as there were no T-bills offers from the apex bank. Despite the zero maturities, we saw NITTY rise for all maturities tracked.
Specifically, NITTY rose for 1 month, 3 months, 6 months and 12months maturities to 9.69% (from 9.37%), 10.02% (from 8.66%), 10.50% (from 8.06%) and 9.90% (from 6.85%) respectively.
T-bills market was quiet in the just concluded week as there was no maturing or refinancing T-Bills which led to liquidity strain.
However, we expect the pressure to ease as there will be OMO of N30.0 billion and NTB worth N264.28 billion maturing in the coming week.
Hence, we expect interest rates to moderate in the coming week despite the growing appetite for NTB by risk-averse investors…..