Money Market Rates Slump as Liquidity Pressures Ease
Short-term benchmark rates slumped on Thursday in the money market as liquidity pressures eased following inflows from the Federal Government of Nigeria (FGN) coupon payment.
In the event of liquidity shortfall, the rate at which the central bank lends money to local lenders declined on account of improved liquidity in the market. Also, overnight lending rate nosedived while deposit money banks fund attract a lower rate.
The past weeks have seen money market rates on the high sides as the liquidity levels in the financial system reduced drastically, especially when the market was debited for about N771 billion for the FGN bond auction in the month.
Yields on short-term local debt instruments plunged as investors continue to position despite exposure to higher inflation, a decision that has been coloured by a dearth of alternative investment options.
Following strained liquidity in the financial system experienced recently, the interbank rate had surged to double-digit highs while cash-rich local banks demand higher rates for funds.
Today, market data shows that the overnight lending rate contracted by 175 basis points to 10.8%, following the inflow from FGN bond coupon payment worth N66.82 million.
Consequently, the Nigerian Interbank offered rate (NIBOR) fell as money market stress eased and banks with liquidity began to seek lower rates today.
Market data from FMDQ Exchange shows that the open repo rate (OPR) and the overnight lending rate (OVN), moderated to 10.50% (from 11.88%) and 10.81% (from 12.56%), respectively.
In the treasury market, bullish momentum drove the yield curve lower following spot rates upward repricing in the primary market auction conducted on Wednesday. # Money Market Rates Slump as Liquidity Pressures Ease