The interbank money market will this week, receive inflow of N608 billion from maturing treasury bills, aggravating the excess liquidity which prompted cost of funds to fall last week.
Last week, the market enjoyed inflow of N400 billion from matured Open Market Operation, OMO, treasury bills. As a result market liquidity absorbed the liquidity mop of N315.33 billion by the Central Bank of Nigeria, CBN, through OMO bills. Consequently, cost of funds fell with average short term interest rate falling by 313 basis points to 9.17 percent last week from 12.13 percent the previous week.
Cost of funds is expected to remain stable or drop further this week as the inflow of N608 billion expected from maturing treasury bills will offset impact of outflow of N178.41 billion through primary market TBs auction to be held by the CBN. Confirming this, analysts at Lagos based Zedcrest Capital Limited said: We expect rates to be relatively stable in the coming week, as there are no significant funding pressures anticipated. Rates should, however, trend significantly lower if inflows from Federation Accounts Allocation Committee (FAAC) payments hit the system.
Analysts at Cowry Asset Management Limited also projected that, This week, CBN will sell T-bills amounting to N178.41 billion which will partly offset the maturing treasury bills worth N608.60 billion. We expect stop rates for 91-day and 182-day to remain flat while 364-day stop rate to rise slightly. Also we feel CBN is poised to mop up, via OMO sales, excess liquidity from FAAC injections that might likely come during the week. Nevertheless, we expect ease in the financial system liquidity to be sustained with resultant decline in interbank rates.
(Vanguard)
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