N160bn OMO maturity not to ease liquidity squeeze…Expert

….As money market rates sustain increase

The Nigerian fixed income market last week, sustained its vibrancy based on guaranteed returns on investments, as more investors take to the fixed income investing options.

However, cross section of experts say that irrespective of the high yields and periodic maturity of the OMO and T-Bills offerings , during which liquidity is pumped into the system, liquidity freeze would linger as the Central Bank of Nigeria sustains its moderation.

Investment One analysts, in its market review for week ended September 08, pointed that though N160 worth of OMO (Open market operations) is billed to mature this week, such may not have e impact on liquidity level as more instruments would be issued to drain such freed funds, sustain high rates of money market instruments.

“Despite N160billion worth of OMO bills maturing in the coming week, we expect the CBN to maintain its efforts in keeping liquidity levels low. As such, we expect money market rates to remain high in the near term”

The CBN uses the OMO as instrument to check monetary policy. The CBN buys or sells securities outright or temporarily in order to add or drain the reserves available to the country’s banking system.

Meanwhile, the fixed income market during the week, witnessed sustained effort by the CBN in keeping system liquidity low by selling N54bn worth of OMO bills at 16.00 per cent and 17.95 per cent stop rates last Friday.
as a result, money market rates continued to expand, with the 1month, 3month and 6month NIBOR rates increasing by 82bps, 74bps and 60bps to 19.31 per cent, 21.18 per cent and 22.64 per cent respectively.

In the bond market, yield movement was largely muted as CBN’s OMO auctions constrained market activities. Yields on the 5yr and 10yr benchmark bonds were unchanged at 16.47% respectively. However, investors were bullish on the 10yr benchmark as the yield declined by 3bps to 16.62%.