N150bn OMO maturity pushes drop in OBB/ON rates to 8.50%/ 9.00 %

The Open Buy Back (OBB) and the overnight rates declined remarkably on Thursday, following the maturity of N150 billion Open Market Operations (OMO) and subsequent inflow of funds in the finance sector.

The Open-Buy-Back and Overnight rates fell to 8.50 per cent and 9.08 per cent, from 18.00 per cent and 19.00 per cent, recorded a day (Wednesday) preceding the OMO maturity. However, the decline occurred, irrespective of Central Bank of Nigeria (CBN) selling N23billion worth of bills at 18.00 per cent and 18.60 per cent stop rates.

The bond market, on Thursday, recorded bullish trades, a development investors linked to the OMO maturities, as it enhanced system liquidity.

The downward trend in yields was most noticeable on the July 2021, which fell by 10bps to 16.27 per cent. the yield on the 5yr and 7yr benchmark bonds were flat at 16.17 per cent and 15.91 per cent respectively, while the yield on the 10yr benchmark bond thinned by 9bps to 16.20 per cent.

Experts project that CBN is likely to keep system liquidity tight in defense of the local currency, as this is poised to sustain high tempo of money market rates, as yields in the bond market are likely to remain range bound in the absence of offshore demands.

Meanwhile, the Nigerian bourse closed in the red for the second trading session in a row with the NSE-ASI down by -1.64%, following sell-off in tickers across sectors. The index YTD return now stands at +22.53%, while market capitalization closed at c.N11.39bn.

Analysts maintained that, “In the near term, we see downside risk to ASI performance from volatility in Brent oil price, given its implication for reserve accretion and exchange rate stability. With that said, we however expect support to market performance from recent reform in the FX market as well as new PFAs guideline, which requires increased investment allocation to equities.

In the currency space, on Thursday, CBN sustained its intervention at the close of trading at the interbank market, the NGN continued to close at N305-306 levels against the USD. With this said, the NGN gained +0.73% to N398.70 against the GBP and +0.95% to N351.35 against the EUR.

At the parallel market, the NGN remained flat at N410 against the EUR, N465 against the GBP but depreciated by -0.54% to N370 against the USD. With this said, the NGN gained +0.80% at the Investors and Exporters’ FX window to close at N363.00 against the USD.