Money Market: Bullish Momentum in Secondary Market

The interbank rates - OBB and OVN - opened the year higher at 1.0% and 1.5% respectively from the close of 0.5% and 0.8% last year as system liquidity fell to ₦821.1bn. By the end of the week, the rates closed at 8.0% and 9.3% despite an increase in system liquidity to ₦1.1tn.

On Thursday, following the inflow from OMO maturities worth ₦411.0bn, the CBN conducted an OMO auction worth ₦60.0bn to mop-up liquidity in the system. Demand at the auction was robust as the 110-day (Offer: ₦10.0bn; Subscription: ₦57.8bn; Sale: ₦10.0bn), 180-day (Offer: ₦10.0bn; Subscription: ₦81.0bn; Sale: ₦10.0bn) and 362-day (Offer: ₦40.0bn; Subscription: ₦539.81bn; Sale: ₦40.0bn) instruments were oversubscribed by 5.8x, 8.1x and 13.5x at marginal rates of 1.5%, 4.3% and 5.7% respectively.

In the secondary market, performance was bullish as average yields across tenors declined 5bps w/w to 0.43%. The 182-day and 364-day instruments traded at lower yields of 0.23% and 0.38% (previous week: 0.38% and 0.72% respectively). Conversely, the 91-day instrument traded flat at 0.38%. In the coming week, we anticipate inflows from maturing OMO instruments worth N211.3bn to shape the movement of rates. However, we expect CBN to keep rates and system liquidity in check through regular auctions.