Market opens with rates expected to decline on N24bn OMO repayment

The financial market opened today after the Easter holiday with inter-bank rates expected to decline as a result of anticipated N24 billion inflow from Open Market Operation (OMO) repayment, this week.

The Overnight (O/N) rate, which is the rate banks borrow from and lend to each other, increased by 5.42 percent to close at 11.17 percent on Thursday before the holiday as against the last close of 5.75 percent on Wednesday.

Also the Open Repo (OPR) rate, a repurchase transaction that is agreed without fixing the maturity date, increased by 5.58 percent to close at 10.83 percent on Thursday compared to 5.25 percent on the previous day.

“We expect rates to decline opening the week in the absence of needs by DMBs, in addition to the about N24bn in OMO repayment,” saud analysts at Parthian Partners, Africa’s premier inter-dealer broker.

The treasury bill market was bearish last week with demand skewed to the short end of the curve and May special bill papers. The long end remained offered during the week as the few buyers available continued to demand higher yields. This trend persisted till the end of the week, a report by Parthian Partners stated.

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“We expect the bearish trend to continue this week, as the tight liquidity drives activity,” the analysts said.

The bond market was also bearish last week with yields expanding by 6bps on average. The belly of the curve (notably the 2034s, 2035s, 2036s and 2037s), as well as the off-the-run papers (2026s and 2042s) were the most active. Cherry-Picking efforts were thus witnessed all week long.

“We expect a similar trend this week, as players continue to seek higher yields”, the analysts added.

At the foreign exchange market last week Naira depreciated by 0.20 percent at the Investors and Exporters (I&E) forex window.

Data from the FMDQ showed that the dollar was quoted at N417.50/$ on Thursday as against the last close of N416.67.

A report by FSDH Research noted that most participants maintained bids between N410.00 and N444.00 per dollar.