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CBN positions to mop up excess liquidity as N630.84bn hit system today

Central Bank of Nigeria (CBN) will today mop-up the excess liquidity from the financial system as N630.84 billion is expected to hit the market.

This amount is expected from combined maturities of Open Market Operation (OMO) and the Nigerian Treasury Bills (NTB).

At the primary market auction held yesterday, the CBN offered NT-Bills worth N225.45 billion across 91-day (N5.85 billion), 182-day (N26.60 billion) and 364-day (N193 billion) tenors.

The FSDH Research show that the NT-Bills market closed on a positive note on Wednesday with average yield declining by 2 percent basis point and settling at 4.44 percent from 4.46 percent on the previous trading day.

Buying interest was witnessed on 30-Jan-20 and 13-Feb-20 maturity NT-Bills, compressing yields by 15 bps and 11bps, respectively. The average OMO yields rose by 31bps to 13.11 percent from the last close 12.80 percent. Average OMO yields on the short-term, medium-term, and long-term maturities increased by 48 bps, 37 bps and 10bps, respectively.

On Wednesday, Overnight (O/N) rate increased by 0.75 percent to close at 14.17 percent from 13.42 percent the previous day while Open Buy Back rate also increased by 1.00 percent to close at 13.33 percent as against 12.33 percent the previous day.

The money market rate increased on Wednesday as outflows from NT-bills auction worth N225.45 billion negatively impacted the system liquidity.

“We expect the money market rates to decline as inflows from bond coupon payment worth N106.1 billion NT-bills worth N225.45 billion and OMO maturities worth N405.39 billion are expected to hit the financial system this week,” analysts at FSDH research said.

At the bond market, the report revealed that the bond market closed on a negative note on Wednesday, as average yields closed higher by 6bps across the curve.

The average yields increased to 8.15 bps from 8.09 percent on the previous day. The 26-APR-2049 maturity bond was the best performer with a decline in yield of 17 bps, while the 27-JAN-2022 maturity bond was the worst performer with an increase in yield of 28 bps.

On Tuesday, the Debt Office Management (DMO) released its bond issuance calendar for the first quarter of 2020, indicating plans to raise funds from the reopening of previous bonds. The DMO plans to raise between N420 billion and N510 billion through FGN bonds between January and March this year. The bonds issuances are scheduled on January 22, February 19 and March 25, this year.

In November, Tranches of the 5-, 10- and 30-year bonds were reopened and offered for sale, according to the Central Bank of Nigeria (CBN)’s economic report for the Month of November 2019.

Terms to maturity of the bonds were 3 years 5 months, 9 years 5 months and 29 years, 5 months, respectively. Total amount offered, subscribed to and allotted were N150.00 billion, N252.35 billion and N157.93 billion, respectively. Allotment on non-competitive basis was N95.00 billion. The bid rate ranged from 11.4890 – 14.8000 per cent, while the marginal rates of the 5-, 10-, and 30-year bonds were 12.0000, 12.9300 and 13.3900 per cent, respectively.

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