Liquidity in the financial market is expected to increase this week following anticipated inflow from Open Market Operation (OMO) worth N157.6 billion.
OMO simply means the buying and selling of government security, which enables a central bank to control the supply of money in the banking system.
Liquidity levels stood at N348.7bn on Thursday, due to inflows from Primary Market Repayments N49.6bn and N187.3bn on OMO and NT-Bills respectively, according to a report by Afrinvest Securities limited.
Consequently, the secondary market rates may maintain bearish outing on the back investor expectations for higher yields and sustained sell-offs.
Investors are advised to cautiously position in NT-Bills that advanced last week. Following the auction, market players shifted focus to the secondary market to fill unmet orders in the Primary Market Auction (PMA) as liquidity levels stood at N348.7bn on Thursday, due to inflows from Primary Market Repayments N49.6bn and N187.3bn on OMO and NT-Bills respectively. However, sell-offs, especially on long-dated bills persisted as investors anticipate higher stop rates in upcoming auctions.
Tight financial system liquidity persisted on all trading sessions last week (N29.6bn short as at Friday, 29-Jan-21) resulting in sell-offs across the yield curve, as investors freed up positions to meet their cash obligations. Thus, average yield in the NT-Bills secondary market advanced 53bps Week-on-Week to close at 1.1% on Friday.
Specifically, the longer dated NT-Bills advanced the most, up 80bps W-o-W with 30-Sep-21 and 14-Oct-21 recording the most sell-offs, up 1.1% apiece. In the same vein, short and medium term NT-Bills inched 34bps and 25bps northwards respectively.
Rates also expanded 28bps higher on average at the NT-Bills primary market as the Central Bank of Nigeria (CBN) conducted a last Wednesday, January 27, 2021 offering a total of N187.3bn which had a 1.6x oversubscription (Total subscribed: N289.6bn). Precisely, stop rates increased 5bps, 30bps and 50bps on the 91-, 182- and 364-Day bills respectively.
At the foreign exchange market, naira steadied at N480 per dollar on the black market on Monday. The local currency weakened by N1.00k as the dollar traded at N478 on Monday as against N477 traded since Thursday at the Bureau De Change (BDC) segment.
Naira marginally appreciated by 0.03 percent as the dollar was quoted at N394.00 on Monday as against the last close of N394.13 on Friday at the Investors and Exporters (I&E) forex window. Most participants maintained bids between N390.00 and N415.95 per dollar, analysts at FSDH research noted.
