With over N840 billion expected to hit the financial system this week through inflows from matured bills and Federal Accounts Allocation Committee (FAAC), liquidity in the system would drive down rates in the money market, analysts have said.
This week, an inflow worth about N300 billion from FAAC and N540 worth of matured bills are expected to hit the system. Maturity of N215.6 billion is expected from the Primary Market Auction (PMA), while another N324.3 billion Open Market Operation (OMO) is expected this week.
The increased liquidity, traders in the money market said would stoke a mop up through PMA scheduled for Wednesday and possible OMO auctions. Last week, the treasury bills market took a slightly bearish turn last week as average rate stood at 11.4 per cent.
Short- term bills advanced 20 basis points week on week to 11 per cent on the back of sell trades on October bills, while medium term instruments closed flat due to investors’ shift to OMO, offering higher yield.
Trading in the secondary market had started off on a cautious note last week due to the Monetary Policy Committee (MPC) meeting outcome expectations as well as the unexpected OMO auction conducted by the Central Bank of Nigeria (CBN) last Tuesday mopping up N 235.9 billion inflows bond coupon payments.
However, the market turned slightly bearish on Wednesday as investors needed to free up liquidity ahead of OMO auction on Thursday where the apex bank sold an additional N 348.6 billion leaving liquidity level at negative N 75.9 billion as at close of market on Friday.
At the FGN Bonds Market, average yield on benchmark bonds advanced marginally to reverse the mild bullish run last week. Market players however showed buying interest in medium-term bonds which dipped 10bps towards the end of the week.
On the flip side, the short-term instruments advanced 34bps due to weaker demand, while long- term bonds stood at an average yield of 14.1 per cent week on week.