Funding Rates Fall to 14.83% as Investors Prepare for OMO Auction

By Dipo Olowookere

The average money market rates marginally depreciated on Wednesday as the recent raising of Cash Reserve Ratio (CRR) by the Central Bank of Nigeria (CBN) continue to have effect on the market.

Business Post observed that the squeeze in financial system liquidity caused by this policy as a result of the debit funding further shrank the funding rates by 0.09 percent to 14.83 percent during the session from 14.93 percent at the previous trading day.

This followed the 0.17 percent decline in the Open Buy Back (OBB), which closed at 14.33 percent against its previous level, 14.50 percent. However, the Overnight (OVN) rate remained flat at 15.33 percent.

Today, Thursday, February 6, the central bank is expected to auction some bills to offshore investors via the Open Market Operations (OMO) and with N310 billion inflows anticipated in OMO maturities, the money market rates are projected to trend lower at the close of transactions.

At the secondary market for treasury bills yesterday, transactions were bearish amid renewed sell pressure during the session across most of the tenors, with the average yields increasing by 0.21 percent to settle at 3.82 percent.

Apart from the one-month instrument, which went down by 0.31 percent to 2.75 percent from 3.06 percent, every other maturity recorded gains at the close of business.

Yield on the one-year bill appreciated by 0.68 percent to settle at 5.44 percent versus 4.76 percent of the previous day, the six-month tenor rose by 0.27 percent to 3.85 percent from 3.57 percent, while yield on the three-month maturity grew by 0.19 percent to 3.23 percent from 3.03 percent.

As expected, attention will be on the OMO sale by the apex today as the offshore investors are expected to rollover their maturities, when the instruments are offered for sale.

The bills will most likely be auctioned in three different tenors and going by the previous exercises, more of the bids will be on the one-year maturity and the bank may decide to further slightly trim the stop rates.