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Liquidity Squeeze Triggers 0.15% Hike in T-Bills Yields

By Dipo Olowookere

At the treasury bills market on Friday, yields recorded a slight 0.15 percent appreciation on the back of a relatively tighter level of system liquidity.

According to analysts at Zedcrest Research, the cash squeeze occurred as a result of the significant OMO sale on Thursday.

At yesterday’s session, the Central Bank of Nigeria (CBN) did not conduct another sale of the debt instrument via the secondary market.

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T-bills rates are anticipated to remain high as market resumes next week as a result of expected further debits for a wholesale SMIS auction by the CBN on Monday.

Meanwhile, Business Post reports that the average money market rate broadly increased by 9.6 percent on Friday to settle at 21.68 percent.

While the Open Buy Back (OBB) went up to 20.86 percent from 11.67 percent, the Overnight (OVN) rose to 22.50 percent from 12.58 percent.

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The rise in the rates came on the back of a significant squeeze in system liquidity from the OMO auctions in the previous session.

System liquidity published by the CBN opening yesterday fell below analysts’ expectation at N76 billion, consequently driving the funding rates significantly higher.

“We expect rates to remain higher due to expected outflows for a wholesale SMIS by the CBN on Monday, which is likely to wipe off the existing system liquidity from its current positive levels,” analysts at Zedcrest Research said.

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Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

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