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Interbank rates to moderate on improved liquidity

Interbank money market rates are expected to moderate as about N200 billion in the Federation Account Allocation Committee (FAAC) distribution expected to filter through the system adds up to treasury bills worth N144.958 billion expected also to mature this week.

“In the week ahead, we expect the inflow of circa N200 billion in FAAC allocations to improve system liquidity and expect money market rates to moderate from current levels. However, there is a high probability the CBN will react by mopping up excess liquidity through OMO auctions in pursuance of its tightening objective,” a dealer told investors.

This week, treasury bills worth N144.958 billion will mature via secondary market, viz: 101-day bills worth N73 billion, 205-day bills worth N40.2324 billion, and 206-day bills worth N31.634 billion.

“In the absence of major outflows via Open Market Operation (OMO) auctions, we anticipate further moderation in interbank interest rates. We further some price rallies (and decline in yields) in secondary market due to anticipated bargain hunting activities following recent boost in financial system liquidity via FAAC disbursements,” another dealer said.

Investment banking and securities dealers disclosed that activities in the Treasury bills market started last week on a sluggish note as sell sentiment was evident on the back of pressured financial system liquidity. Average T-bills rate moved in similar mode to interbank money market rates as it inched higher in the first two trading sessions of the week but declined towards the end of the week on the back of a T-bills maturity of N138.2 billion, closing at 17 per cent on Friday, down 62 basis points (bps) week on week (W-o-W).

On Wednesday, the apex bank offered N138.2 billion in 91-days, 182-days and 364-days T-bills at a primary market auction. Against the backdrop of low system liquidity, the auction was undersubscribed by 0.2 xs and consequently under allotted by N22.9 billion. The CBN allotted N20.9 billion of the 91-days, N28.2 billion of the 182-days and N32.4 billion of the 364-days T-bills at stop rates of 14 per cent, 17.1 per cent and 18.3 per cent respectively.