CBN raises N18bn out of N70bn OMO auction Tuesday

Market liquidity on Tuesday, opened negative at N97billion, which manifested in Wednesday’s transactions, as this reflected on the debt instrument market, Treasury bills and the REPO instruments. Interbank rates traded at a range between 25per cent and 35 per cent levels.

At an OMO auction on Tuesday, the CBN offered N70bn, but raised N18bn from the sale of the 198-day paper at a stop rate of 17.80 per cent. There were no sales of the 93-day paper. On the secondary market for NTBs, yields were relatively flat.
The Nigerian money market rates on Tuesday, responded to maturity demands and demands to close at divergent levels, Repurchase rates recorded decline in all instruments while Treasury bills tended upwards.

At the end of transaction on Tuesday, NTB 01/02/18 closed flat at 17.35 per cent, while NTB 03/05/18 added 0.01 per cent to close at 17.51 per cent, from 17.50 per cent which opened trading. NTB 02/08/18 closed higher at 16.84 per cent gaining 0.08 per cent, while NTB 01/11/18 also closed flat at 15.92 per cent.

However, the repurchase agreement (REPO) instruments recorded remarkable decline in price at the end of trading. Overnight rate declined to 31.83 from 41.67 per cent, reflecting 9.84 per cent. 30 day declined to 30.50 per cent form 46.17 per cent, indicating 15.67 per cent drop, 90 days declined to 32.50 per cent from 47.67 per cent, showing 15.17 per cent drop, while 180 day instrument dropped from 48.92 per cent rate to 33.50, indicating a drop by 15.42 per cent
Also, the OBB rate declined to 29.17 per cent, from 38.33 per cent, reflecting a drop by 9.16 per cent.

Repurchase agreements (repos) are similar to secured loans – with the important distinction that the title to the security passes to the cash provider for the duration of the agreement. Fixed-term repos can be short-term (often overnight) contracts, but can also be longer-term arrangements. Open repos, those with no fixed maturity date, allow the parties to renegotiate the interest rate daily.

Repos play an important role in assisting the smooth functioning of debt markets by promoting liquidity. They are the main instrument the Reserve Bank of Australia uses to undertake its domestic market operations.

The FGN bond market was relatively active, and yields dipped across the curve. Pricing has been set for the new FGN Eurobonds: 6.5% for the 10-year paper and 7.625% for the new 30-year instrument. Initial demand was healthy for both bonds.

Stories by Bonny Amadi