INTEREST rates are expected to trend higher in this week as liquidity constraints tighten in the financial system. With an anticipated N700 billion mop-up through Open Market Operations (OMO) and other liquidity management strategies, market participants are bracing for reduced cash flow and elevated borrowing costs. This move, aimed at stabilizing excess liquidity, could further impact interbank lending rates, bond yields, and overall credit conditions in the economy.
Dealers from Cowry Assets Management Limited disclosed that a total of N1.29 trillion worth of treasury bills is set to mature, while the Central Bank of Nigeria (CBN) has scheduled a N700 billion auction at the forthcoming PMA.
As a result, market sentiment and activity are expected to be largely driven by the
auction, with money market rates likely to trend higher amid prevailing liquidity constraints and the N700 billion expected to be mopped up from the financial system.
The CBN had successfully raised N1.4 trillion through Open Market Operations (OMO) bills in its latest primary market auction. The offering, conducted on last Thursday, witnessed strong investor interest, with local banks and foreign portfolio investors actively participating to capitalize on elevated yields in the naira money market.
The demand for money market instruments has surged in response to rising yields on naira assets, driven by inflationary pressures and a tightening monetary policy stance. Despite the CBN’s aggressive efforts to curb inflation through rate hikes, consumer price inflation has continued to climb, reaching 34.80 per cent in December 2024.
Market analysts noted that the OMO auction attracted bids significantly exceeding the initial offer, underscoring the growing appetite for short-term government securities. The auction results showed that investors submitted bids totaling N1.92 trillion, far surpassing the N600 billion initially offered for subscription. In response to the overwhelming demand, the CBN increased its issuance, ultimately selling N1.4 trillion worth of OMO bills.
Stop rates for the 355-day and 362-day maturities were finalized at 21.3249 per cent and 21.45 per cent, respectively, reflecting the market’s pricing of inflation risks and policy expectations. The significant oversubscription highlights investors’ continued preference for high-yield naira-denominated assets, particularly amid ongoing foreign exchange market reforms and monetary policy adjustments.
As the CBN continues its liquidity management strategy, the impact of these auctions on market interest rates and inflation trends will be closely monitored by analysts and investors alike
The CBN had successfully raised N1.4 trillion through Open Market Operations (OMO) bills in its latest primary market auction. The offering, conducted on Thursday, witnessed strong investor interest, with local banks and foreign portfolio investors actively participating to capitalize on elevated yields in the naira money market.
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