Lending Rate Rises as Investors Bid 14.50% for 324-day T-Bills

By Dipo Olowookere

The average money market rate increased on Tuesday by 4.41 percent to settle at 6.79 percent at the end of trading day.

While the Open Buy Back (OBB) rate advanced by 2.16 percent to 6.33 percent, the Overnight (OVN) rate went up by 2.25 percent to finish at 7.25 percent.

According to analysts at Zedcrest Research, this came on the back of outflows from a further OMO auction, about N82 billion, by the Central Bank of Nigeria (CBN).

The net system liquidity is consequently estimated to close the day at N350 billion from N430 billion estimated opening levels.

“We expect continued interventions by the CBN to pressure rates higher towards weekend,” Zedcrest Research said.

Meanwhile, the T-bills market remained significantly bearish as yields trended higher by 0.30 percent to 13.01 percent on average.

This came on the back of a further OMO auction by the CBN, where it elongated its offering into a 324-day tenor, the longest since last year August 25.

Market players responded by selling off the short tenured bills as high as 13.50 percent on some maturities, as they became increasingly risk off, taking the move as a sign of desperation on the part of the CBN.

Subscriptions at the OMO auction remained weak, with market players relatively uninterested in the shorter tenured offerings, whilst bidding as high as 14.50 percent for the 324-day tenor.

The CBN eventually sold a total of N300 million of the 198-day and N81.65 billion of the 324-day at 12.50 percent and 13.20 percent respectively.